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Government Spending Multipliers and Distribution of Commodity Booms in the Spatial Economy

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  • Daza, Brian

    (University of Michigan)

Abstract

This paper uses the regional redistribution of PeruÕs government revenueÑincreased due to the mineral commodity price boom in the 2000s -- to estimate the effects of government spending. I begin by calculating local effects on households, workers, and firms, and a local open economy relative multiplier. Motivated by a general equilibrium framework, I then incorporate a Spatial Auto-Regressive (SAR) model to measure trade-related spatial spillovers. I find that increases in government spending stimulate larger relative output growth and positively impact relative wages, expenditures, and income. However, there is no corresponding relative rise in labor or value added. The spatial analysis helps interpret these results and measures the trade-related indirect effects of local spending on output.

Suggested Citation

  • Daza, Brian, 2024. "Government Spending Multipliers and Distribution of Commodity Booms in the Spatial Economy," Working Papers 690, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:690
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    File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers676-700/r690.pdf
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    More about this item

    Keywords

    Fiscal Multiplier; Interregional Trade; Commodity Boom; Spatial Econometrics;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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