Hannu Karhunen (@hannukarhunen.bsky.social)

Fiscal Transfers to Local Governments and the Distribution of Economic Activity (Forthcoming Article) - We study the economic effects of transfers to local governments using a reform of the Finnish municipal grant system as a source of exogenous variation. We find that higher grants lead to lower municipal taxes and fees, higher public spending and improved budget balance. These changes in local fiscal policy lead to an increase in private sector jobs. Our estimates imply a cost per job of e33,000. The increase in jobs is paired with a reduction in commuting to other municipalities. The effect on migration seems small, suggesting grants bring local benefits without drastically affecting where households choose to live. https://www.aeaweb.org/articles?id=10.1257/pol.20240903&from=f