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Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments

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  • Steven Pennings

Abstract

US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.

Suggested Citation

  • Steven Pennings, 2021. "Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments," American Economic Review, American Economic Association, vol. 111(5), pages 1689-1719, May.
    • Handle: RePEc:aea:aecrev:v:111:y:2021:i:5:p:1689-1719
    DOI: 10.1257/aer.20190240
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    References listed on IDEAS

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    Cited by:

    1. Galego Mendes,Arthur & Miyamoto,Wataru & Nguyen,Thuy Lan & Pennings,Steven Michael & Feler,Leo, 2023. "The Macroeconomic Effects of Cash Transfers : Evidence from Brazil," Policy Research Working Paper Series 10652, The World Bank.
    2. Arthur Mendes & Steven Pennings, 2025. "One Rule Fits All? Heterogeneous Fiscal Rules for Commodity Exporters When Price Shocks Can Be Persistent: Theory and Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 55, January.
    3. James Sampi & Guillermo Javier Vuletin & J.T. Araujo, 2024. "Firm Size and Public Investment Multipliers : Micro Evidence from Peru," Policy Research Working Paper Series 10997, The World Bank.
    4. Hershbein, Brad & Stuart, Bryan A., 2023. "Place-based consequences of person-based transfers: Evidence from recessions," Journal of Public Economics, Elsevier, vol. 224(C).
    5. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael Walker, 2022. "General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya," Econometrica, Econometric Society, vol. 90(6), pages 2603-2643, November.
    6. Antonella Bancalari & Juan Pablo Rud, 2024. "Resource windfalls, public expenditures and local economies," IFS Working Papers W24/54, Institute for Fiscal Studies.
    7. Bessho, Shun-ichiro, 2021. "Local fiscal multipliers and population aging in Japan," Japan and the World Economy, Elsevier, vol. 60(C).
    8. Fiuratti, Federico & Nikolova, Desislava & Pennings, Steven & Schiffbauer, Marc, 2025. "Are regional fiscal multipliers on EU structural and investment fund spending large? A reassessment of the evidence," Journal of Macroeconomics, Elsevier, vol. 85(C).
    9. Pennings, Steven, 2022. "Locally financed and outside financed regional fiscal multipliers," Economics Letters, Elsevier, vol. 213(C).
    10. Chang Liu & Yinxi Xie, 2023. "Understanding Inflation Dynamics: The Role of Government Expenditures," Staff Working Papers 23-30, Bank of Canada.
    11. Francis Mulangu & Michael Keller & Jean-Pascal Nganou & Mokhtar Benlamine, 2025. "Understanding How Economic Growth Dimensions Influence Multidimensional Poverty: Evidence from 80+ Countries Over Two Decades," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 37(6), pages 1130-1174, December.
    12. Ábrahám, Árpád & Brogueira de Sousa, João & Marimon, Ramon & Mayr, Lukas, 2023. "On the design of a European Unemployment Insurance System," European Economic Review, Elsevier, vol. 156(C).
    13. Leo Feler & Arthur Mendes & Wataru Miyamoto & Thuy Lan Nguyen & Steven Pennings, 2023. "The Macroeconomic Effects of Cash Transfers: Evidence from Brazil," Working Paper Series 2024-02, Federal Reserve Bank of San Francisco.
    14. Clemens, Jeffrey & Hoxie, Philip G. & Veuger, Stan, 2025. "Was pandemic fiscal relief effective fiscal stimulus? Evidence from aid to state and local governments," Journal of Macroeconomics, Elsevier, vol. 86(C).
    15. Jing Cynthia Wu & Yinxi Xie & Ji Zhang, 2024. "Does Unconventional Monetary and Fiscal Policy Contribute to the COVID Inflation Surge in the US?," Staff Working Papers 24-38, Bank of Canada.
    16. Kondylis,Florence & Loeser,John Ashton, 2021. "Intervention Size and Persistence," Policy Research Working Paper Series 9769, The World Bank.
    17. Antonella Bancalari & Juan Pablo Rud, 2025. "Resource windfalls, Public Expenditures, and Local Economies," Working Papers 348, Red Nacional de Investigadores en Economía (RedNIE).
    18. Timothy G. Conley & Bill Dupor & Rong Li & Yijiang Zhou, 2023. "Decomposing the Government Transfer Multiplier," Working Papers 2023-017, Federal Reserve Bank of St. Louis, revised 17 Nov 2023.
    19. Jing Cynthia Wu & Yinxi Xie, 2025. "Unconventional Monetary and Fiscal Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 56, April.
    20. Fiuratti, Federico Ivan & Nikolova, Desislava Enikova & Pennings, Steven Michael & Schiffbauer, Marc Tobias, 2024. "Are Regional Fiscal Multipliers on EU Structural and Investment Fund Spending Large ? A Reassessment of the Evidence," Policy Research Working Paper Series 10658, The World Bank.
    21. Gassmann,Franziska & Gentilini,Ugo & Morais,Julieta & Nunnenmacher,Conrad & Okamura,Yuko & Bordon,Giulio & Valleriani,Giorgia, 2023. "Is the Magic Happening ? A Systematic Literature Review of the Economic Multiplier of Cash Transfers," Policy Research Working Paper Series 10529, The World Bank.
    22. Bancalari, Antonella & Rud, Juan Pablo, 2024. "Resource Windfalls, Public Expenditures and Local Economies," IZA Discussion Papers 17464, IZA Network @ LISER.
    23. Timothy G. Conley & Bill Dupor & Rong Li & Yijiang Zhou, 2025. "When Regional Isn’t Aggregate: Joint Estimation of Government Transfer Multipliers," Working Papers 2025-028, Federal Reserve Bank of St. Louis.

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    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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