Spatial analysis of employment multilpliers in Spanish labor markets

The purpose of this work is to investigate the effect of employment promotion policies in Spain. In general, this depends on the ability of the intervention at creating new jobs in the targeted area, but also, to a large extent, on the impact they have on other parts of the local economy. Estimating the latter effect of the local multiplier, is therefore, important for regional economic development policies. Along the lines of Moretti (2010), we present an empirical analysis of the local multipliers using data of Spanish labor market areas over the period 1999-2007. From the methodological point of view, in this work not only endogeneity (via instrumental variables estimates), but also spatial effects are taken into account. According to the results, the inclusion of spatial effects reveals that the magnitude of the multiplier could be limited.