Earthquakes, grants and public expenditure: how municipalities respond to natural disasters
Additional information
Authors
Masiero G.,
Santarossa M.
Type
Journal Article
Year
2020
Language
English
Abstract
We analyze the response of municipalities to the occurrence of natural disasters in terms of spending behavior, use of upper tier transfers and recovery, using balance sheet data of about 8000 Italian municipalities for the period 2000-2015 and the universe of earthquakes events. We find evidence of increasing expenditure for about 12 years after the shocks, with asymmetric responses between earthquake-related and unconditional grants, and heterogeneous flypaper effects across the country. While in Northern municipalities expenditure tends to regress to pre-earthquake levels, Southern municipalities stick to higher expenditure levels when grants drop. This evidence is coupled with a faster recovery of private income and housing prices in Northern municipalities.
Journal
Journal of Regional Science
Volume
60
Number
3
Start page number
481
End page number
516
Keywords
Natural disasters, Local expenditure, Intergovernmental transfers, Matching grants, Flypaper effect, Economic growth
