IDEAS home Printed from https://ideas.repec.org/p/red/sed015/1020.html
   My bibliography  Save this paper

Are State Governments Roadblocks to Federal Stimulus? Evidence from Highway Grants in the 2009 Recovery Act

Author

Listed:
  • Sylvain Leduc

    (Federal Reserve Bank of San Francisco)

Abstract

We examine how state governments adjusted spending in response to the large temporary increase in federal highway grants under the 2009 American Recovery and Reinvestment Act (ARRA). The mechanism used to apportion ARRA highway grants to states allows us to isolate exogenous changes in these grants. We find that states increased highway spending over 2009 to 2011 more than dollar-for-dollar with the ARRA grants they received. We examine whether rent-seeking efforts could help explain this result. We find states with more political contributions from the public-works sector tended to spend more out of their ARRA highway funds than other states.

Suggested Citation

  • Sylvain Leduc, 2015. "Are State Governments Roadblocks to Federal Stimulus? Evidence from Highway Grants in the 2009 Recovery Act," 2015 Meeting Papers 1020, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1020
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2015/paper_1020.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 1-50.
    2. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
    3. Sylvain Leduc & Daniel Wilson, 2013. "Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 89-142.
    4. Singhal, Monica, 2008. "Special interest groups and the allocation of public funds," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 548-564, April.
    5. Daniel J. Wilson, 2012. "Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 251-282, August.
    6. Gabriel Chodorow-Reich & Laura Feiveson & Zachary Liscow & William Gui Woolston, 2012. "Does State Fiscal Relief during Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 118-145, August.
    7. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413.
    8. Gilles Duranton & Matthew A. Turner, 2011. "The Fundamental Law of Road Congestion: Evidence from US Cities," American Economic Review, American Economic Association, vol. 101(6), pages 2616-2652, October.
    9. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    10. Edward M. Gramlich, 1978. "State and Local Budgets the Day after It Rained: Why Is the Surplus So High?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(1), pages 191-216.
    11. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, vol. 96(11), pages 1079-1091.
    12. Gramlich, Edward M, 1979. "Stimulating the Macro Economy through State and Local Governments," American Economic Review, American Economic Association, vol. 69(2), pages 180-185, May.
    13. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    14. Robert P. Inman, 2008. "The Flypaper Effect," NBER Working Papers 14579, National Bureau of Economic Research, Inc.
    15. 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, vol. 92(1), pages 71-92, March.
    16. James Feyrer & Bruce Sacerdote, 2011. "Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Recovery and Reinvestment Act," NBER Working Papers 16759, National Bureau of Economic Research, Inc.
    17. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Masayoshi Hayashi & Wataru Yamamoto, 2017. "Information sharing, neighborhood demarcation, and yardstick competition: an empirical analysis of intergovernmental expenditure interaction in Japan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 134-163, February.
    2. Allers, Maarten A. & Vermeulen, Wouter, 2016. "Capitalization of equalizing grants and the flypaper effect," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 115-129.
    3. J. Zachary Klingensmith, 2016. "Pork-Barrel Spending and State Employment Levels: Do Targeted National Expenditures Increase State Employment in the Long Run?," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 257-279, Winter.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sylvain Leduc & Daniel Wilson, 2017. "Are State Governments Roadblocks to Federal Stimulus? Evidence on the Flypaper Effect of Highway Grants in the 2009 Recovery Act," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 253-292, May.
    2. Gerald Carlino & Robert P. Inman, 2013. "Macro Fiscal Policy in Economic Unions: States as Agents," NBER Working Papers 19559, National Bureau of Economic Research, Inc.
    3. Gerald Carlino & Robert P. Inman, 2016. "Fiscal Stimulus in Economic Unions: What Role for States?," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 1-50.
    4. Sylvain Leduc & Daniel Wilson, 2013. "Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 89-142.
    5. Garin, Andrew, 2019. "Putting America to work, where? Evidence on the effectiveness of infrastructure construction as a locally targeted employment policy," Journal of Urban Economics, Elsevier, vol. 111(C), pages 108-131.
    6. Robert S. Chirinko & Daniel J. Wilson, 2023. "Job Creation Tax Credits, Fiscal Foresight, and Job Growth: Evidence from US States," National Tax Journal, University of Chicago Press, vol. 76(3), pages 481-523.
    7. Michihito Ando, 2017. "How much should we trust regression-kink-design estimates?," Empirical Economics, Springer, vol. 53(3), pages 1287-1322, November.
    8. Sylvain Leduc & Daniel J. Wilson, 2022. "The Road of Federal Infrastructure Spending Passes Through the States," Working Paper Series 2022-03, Federal Reserve Bank of San Francisco.
    9. Aart Kraay, 2014. "Government Spending Multipliers in Developing Countries: Evidence from Lending by Official Creditors," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 170-208, October.
    10. Joonkyu Choi & Veronika Penciakova & Felipe Saffie, 2021. "Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier," FRB Atlanta Working Paper 2021-13, Federal Reserve Bank of Atlanta.
    11. Feiveson, Laura, 2015. "General revenue sharing and public sector unions," Journal of Public Economics, Elsevier, vol. 125(C), pages 28-45.
    12. Emma Hooper & Sanjay Peters & Patrick A. Pintus, 2021. "The impact of infrastructure investments on income inequality: Evidence from US states," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(2), pages 227-256, April.
    13. Gilles Duranton & Matthew A. Turner, 2011. "The Fundamental Law of Road Congestion: Evidence from US Cities," American Economic Review, American Economic Association, vol. 101(6), pages 2616-2652, October.
    14. Imai, Masami, 2022. "Local economic impacts of legislative malapportionment," Journal of Urban Economics, Elsevier, vol. 131(C).
    15. Buchheim, Lukas & Watzinger, Martin, 2017. "The Employment Effects of Countercyclical Infrastructure Investments," Discussion Papers in Economics 34877, University of Munich, Department of Economics.
    16. Eric Brunner & Joshua Hyman & Andrew Ju, 2020. "School Finance Reforms, Teachers' Unions, and the Allocation of School Resources," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 473-489, July.
    17. Dupor, Bill & Guerrero, Rodrigo, 2017. "Local and aggregate fiscal policy multipliers," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 16-30.
    18. Miquel-Àngel Garcia-López & Camille Hémet & Elisabet Viladecans-Marsal, 2017. "How does transportation shape intrametropolitan growth? An answer from the Regional Express Rail," Journal of Regional Science, Wiley Blackwell, vol. 57(5), pages 758-780, November.
    19. Sebastian Langer & Artem Korzhenevych, 2019. "Equalization Transfers and the Pattern of Municipal Spending: An Investigation of the Flypaper Effect in Germany," Annals of Economics and Finance, Society for AEF, vol. 20(2), pages 737-765, November.
    20. Christian Bredemeier & Falko Juessen & Roland Winkler, 2020. "Fiscal Policy and Occupational Employment Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(6), pages 1527-1563, September.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed015:1020. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.