Jobs Multipliers: Evidence from a Large Fiscal Stimulus in Spain*

We estimate the unemployment effects of a large fiscal stimulus in Spain (Plan Espanol para el Estimulo de la Economia y el Empleo, the Spanish Plan for the Stimulus of the Economy and Employment, commonly known as Plan E), in which the national government transferred funds to municipalities to carry out local investment projects. Using a difference-in-difference approach by exploiting variation in the timing of the execution of projects across municipalities, we find that 100,000 euros of stimulus reduced unemployment by 0.74 job-years. We allow for possible spatial effects (i.e., the propagation of the stimulus to neighboring municipalities), and we find that these are sizable, representing 13.8 percent of the "local" effect. Our estimate of the multiplier falls in the lower range of previous work.