Who benefits from increased government spending? a state-level analysis
AbstractWe simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2008) 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 nonmilitary spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While nonmilitary shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in more-urban, lower-income states.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2009-006.
Date of creation: 2009
Date of revision:
Other versions of this item:
- Owyang, Michael T. & Zubairy, Sarah, 2013. "Who benefits from increased government spending? A state-level analysis," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 445-464.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-02 (All new papers)
- NEP-GEO-2009-08-02 (Economic Geography)
- NEP-PBE-2009-08-02 (Public Economics)
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