Local multipliers at work

We measure the effects of a substantial place-based policy shock on the local labor market systems exploiting as an instrumental variable the peculiar information necessary to apply for capital subsidies in Italy during the period 1996-2006. The results show the presence of positive multipliers in the South of Italy, slightly lower than what was previously found for the US but much higher than those identified for European and Asian countries. The reasons for this finding lie in the greater accuracy of the data, in the relevance of the instrument used, and in the widespread underutilization of production factors