How large is the local fiscal multiplier? Evidence from Chinese counties

We estimate local fiscal multipliers using annual data for China counties. * The identification exploits a peculiar feature of China's intergovernmental grants. * The analysis points to local fiscal multipliers of approximately 0.6. * Local public spending has striking effects on stimulating in-county investment. The paper estimates local fiscal multipliers using annual data for 1800 China counties. The identification exploits a peculiar feature of the allocation mechanism of China's intergovernmental transfers that triggers exogenous variations on local public spending. When aggregate central... Mehr ...