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Who benefits from increased government spending? A state-level analysis

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  • Owyang, Michael T.
  • Zubairy, Sarah

Abstract

We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2011) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus non-military spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While non-military shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in lower-income states.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 3 ()
Pages: 445-464

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Handle: RePEc:eee:regeco:v:43:y:2013:i:3:p:445-464

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Web page: http://www.elsevier.com/locate/regec

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Keywords: Fiscal policy; Structural VAR; Government spending;

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Cited by:
  1. Bernd Hayo & Matthias Uhl, 2012. "Regional Effects of Federal Tax Shocks," MAGKS Papers on Economics 201217, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Steven Fazzari & James Morley & Irina Panovska, 2013. "State-Dependent Effects of Fiscal Policy," Discussion Papers 2012-27B, School of Economics, The University of New South Wales.
  3. Emily Anderson & Atsushi Inoue & Barbara Rossi, 2012. "Heterogeneous Consumers and Fiscal Policy Shocks," 2012 Meeting Papers 261, Society for Economic Dynamics.

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