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Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Recovery and Reinvestment Act

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  • James Feyrer
  • Bruce Sacerdote

Abstract

We use state and county level variation to examine the impact of the American Recovery and Reinvestment Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending. Time series analysis at the state level suggests a smaller response with a per job cost of about $400,000. These results imply Keynesian multipliers between 0.5 and 1.0, somewhat lower than those assumed by the administration. However, the overall results mask considerable variation for different types of spending. Grants to states for education do not appear to have created any additional jobs. Support programs for low income households and infrastructure spending are found to be highly expansionary. Estimates excluding education spending suggest fiscal policy multipliers of about 2.0 with per job cost of under $100,000.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16759.

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Date of creation: Feb 2011
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Handle: RePEc:nbr:nberwo:16759

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  1. Alan J. Auerbach & Yuriy Gorodnichenko, 2010. "Measuring the Output Responses to Fiscal Policy," NBER Working Papers 16311, National Bureau of Economic Research, Inc.
  2. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2009. "New Keynesian versus old Keynesian government spending multipliers," Working Paper Series, European Central Bank 1090, European Central Bank.
  3. Brian Knight, 2002. "Endogenous Federal Grants and Crowd-out of State Government Spending: Theory and Evidence from the Federal Highway Aid Program," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 71-92, March.
  4. Daniel J. Wilson, 2010. "Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act," Working Paper Series, Federal Reserve Bank of San Francisco 2010-17, Federal Reserve Bank of San Francisco.
  5. Clemens, Jeffrey & Miran, Stephen, 2010. "The effects of state budget cuts on employment and income," MPRA Paper 38715, University Library of Munich, Germany.
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Cited by:
  1. Mark Bils & Peter J. Klenow & Benjamin A. Malin, 2012. "Testing for Keynesian Labor Demand," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2012, Volume 27, pages 311-349 National Bureau of Economic Research, Inc.
  2. Sylvain Leduc & Daniel Wilson, 2013. "Are state governments roadblocks to federal stimulus? Evidence from highway grants in the 2009 Recovery Act," Working Paper Series, Federal Reserve Bank of San Francisco 2013-16, Federal Reserve Bank of San Francisco.
  3. Bachmann, RĂ¼diger & Sims, Eric R., 2012. "Confidence and the transmission of government spending shocks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(3), pages 235-249.
  4. Carlino, Gerald A. & Inman, Robert P., 2014. "Macro fiscal policy in economic unions: states as agents," Working Papers 14-20, Federal Reserve Bank of Philadelphia.
  5. Sylvain Leduc & Daniel Wilson, 2012. "Roads to prosperity or bridges to nowhere? theory and evidence on the impact of public infrastructure investment," Working Paper Series, Federal Reserve Bank of San Francisco 2012-04, Federal Reserve Bank of San Francisco.
  6. Mark Hoekstra & Steven L. Puller & Jeremy West, 2014. "Cash for Corollas: When Stimulus Reduces Spending," NBER Working Papers 20349, National Bureau of Economic Research, Inc.
  7. Joseph E. Aldy, 2014. "The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Oil Drilling Moratorium," NBER Working Papers 20409, National Bureau of Economic Research, Inc.

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