The American Recovery and Reinvestment Act: Solely a government jobs program?
AbstractThis paper estimates the private and government sector employment effects of American Recovery and Reinvestment Act (ARRA) spending via an instrumental variables strategy. We argue that this aid was effectively fungible and states used it to offset declines in revenue. This enables us to use exogenous variation in states’ budget positions to identify the Act's employment effects. We also exploit exogenous variation across states in ARRA highway funding. According to our benchmark estimates, average state and local government employment, during the 24 months following the program's inception, was between 156,000 and 563,000 persons greater as a result of ARRA spending (90% confidence interval). The corresponding estimate for the private sector ranges from a loss of 182,000 to a gain of 1.1 million jobs. Our point estimate for the implied cost of creating a job lasting one year is $202,000, which is substantially larger than the corresponding estimate from the President's Council of Economic Advisors.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 60 (2013)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/505566
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- William Dupor & Rong Li, 2013. "The 2009 recovery act and the expected inflation channel of government spending," Working Papers 2013-026, Federal Reserve Bank of St. Louis.
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