The local multiplier of income support paid in a complementary currency: Comparative evaluation in the city of Barcelona

15 Jun 2023, 12:56 p.m.
Mercè Roca, Marta Segura, Jordi Puig and Susana Martín Belmonte

Emerging from social activism, 'new-municipalism' initiatives have gained traction in local administrations as movements of political insurgency (Dikeç and Swyngedouw, 2017), with the city of Barcelona becoming something of a flagship (Russell, 2019; Thompson, 2021). They have shifted the attention of local administrations to welfare systems (Andreotti et al., 2012) and towards institutionally supporting programs aimed at controlling capital flows, shortening supply chains, socialising finance, creating self-sufficient circular economies, and re-localizing wealth creation (Jarvis, 2019; Thompson et al., 2022).

In this context, grounded in the conceptualisation of the urban economy as a 'leaky bucket' from which resources flow out due to the forces of capitalism and globalisation (Ward and Lewis, 2002), complementary currencies have been promoted to protect, stimulate, and re-orient economic activities at the local or regional level (Blanc, 2011; Seyfang, 2006). Previous research has identified the need to move beyond the identification of alternative practices towards analysing their convenience, strengths, and weaknesses (North, 2014; Jonas, 2010; Fickey, 2011). Existing literature on the local effects of using complementary currencies to provide support payments in deprived areas is scant and inconclusive (North, 2014; Pacione, 1997).

To fill this gap, our study in the paper analyses the local effects of income support payments provided in a complementary currency in Barcelona. The study is based on comparing the LM3 Local Multiplier measures (Sacks, 2002) of income support payments provided by the City Council of Barcelona in euros and in a complementary currency, the REC, developed under the B-MINCOME program of public support for disadvantaged neighbourhoods by the local government of Barcelona.

The results obtained show that the local impact of public income support can be enhanced when it is paid in a complementary currency and identify factors that mediate this effect. Results show that, after 13 months of circulation, the REC complementary currency achieved a larger local multiplier than payments in euros. Whereas the LM3 multiplier for payments in euros was 1.94 in Eix Besòs, implying a rate of local circulation retention of 6.21%, the LM3 multiplier for payments in RECs was 2.09 and the rate of local circulation retention was 21.79%. Moreover, the weighed cumulative local multiplier considering the total effects of the complementary currency assessing all the exchanges generated by the currency reached a value of 2.95.

Although public administrations have shown interest in complementary currencies, this study contributes to going beyond theorisation and boosterism surrounding grassroots initiatives by providing  concrete empirical evidence of an instance where complementary currencies increase the local impact of public expenditure. Moreover, while it shows their positive local impact it demonstrates a novel comparative methodology for evaluating public policies based on complementary currencies.



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Read the accompanying article on Urban Studies OnlineFirst here.


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