Shake me the money! Transfers multipliers when earthquakes strike in Italy

Economics

Speaker:Francesco Porcelli, University of Exeter
Date: Wednesday 13 November 2013
Time: 16.00
Location: Matrix Lecture Theatre, Building One

Further details

We estimate the output effect of an earthquake distinguishing between the negative supply shock due to the disaster, and the positive demand shock due to public insurance. Relying on an innovative joint identification strategy applied to Italian data we show that, net of transfers and marginal tax rebates, a quake unambiguously contracts local output. However, this fall is more than compensated by public insurance, with output multipliers of public spending on reconstruction between 1.1 and 2.3. Overall, output falls in uninsured municipalities while it expands in insured regions. Using a New-Keynesian model of a currency union that matches the magnitude of the relative multiplier, we estimate an upper bound to the loss of capital stock as high as 2.4 percent of the installed capacity.