Knut Ward Heimdal

• Kordt, Amund H.; Heimdal, Knut Ward & Holm, Martin B. (2025). Local Permanent Fiscal Multipliers. Full text in Research Archive Show summary

  We provide a framework to explain how permanent federal transfers affect local economic output. The effect depends on import shares, labor supply elasticity, capital use in government production, industry composition, and taxation. Using plausibly exogenous variation in federal transfers to Norwegian municipalities, we estimate an average multiplier of 1.1 -- each krone in transfers raises local output by 1.1 kroner. Municipalities with low import shares have multipliers near 2, while those with high import shares have multipliers around 0.7. These results are consistent with our theory under elastic labor supply, a condition supported by our empirical findings.

• Holm, Martin B.; Heimdal, Knut Ward & Kordt, Amund H. (2024). Local fiscal multipliers: Evidence from Norway. Full text in Research Archive Show summary

  We estimate local government spending multipliers using administrative data on municipalities in Norway. Based on identified shocks we estimate the dynamic response of gross production across geographical units and sectors of the economy. We find that the multipliers increase with the home bias in consumption. The results indicate that spending multiplier is closely linked to import leakages, which are reduced as the size of the economy increases. We observe that the public sector is the first to be affected by public spending, before the multiplier builds up in the private sector. We also show that similar results can be obtained by using a structural vector autoregressive models (SVAR) with various identifying assumptions.

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