IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v11y2019i2p1-34.html
   My bibliography  Save this article

Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?

Author

Listed:
  • Gabriel Chodorow-Reich

Abstract

A geographic cross-sectional fiscal spending multiplier measures the effect of an increase in spending in one region of a monetary union. Empirical studies of such multipliers have proliferated. I review this research and what the evidence implies for national multipliers. Based on an updated analysis of the ARRA and a survey of empirical studies, my preferred point estimate for a cross-sectional multiplier is 1.8. The paper also discusses conditions under which the cross-sectional multiplier provides a rough lower bound for the national, no-monetary-policy-response multiplier. Putting these elements together, the cross-sectional evidence suggests a national no-monetary-policy-response multiplier of 1.7 or above.

Suggested Citation

  • Gabriel Chodorow-Reich, 2019. "Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 1-34, May.
  • Handle: RePEc:aea:aejpol:v:11:y:2019:i:2:p:1-34
    Note: DOI: 10.1257/pol.20160465
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/pol.20160465
    Download Restriction: no

    File URL: https://www.aeaweb.org/articles/attachments?retrieve=v2jgeeVCf4QgV1fPLxkX_AMS0SaFGmtu
    Download Restriction: no

    File URL: https://www.aeaweb.org/articles/attachments?retrieve=8CFicuUmEkRk9hB7FzEsSVdNMeNDGK-8
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Owen M. Zidar, 2015. "Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment," NBER Working Papers 21035, National Bureau of Economic Research, Inc.
    2. Hooker, Mark A & Knetter, Michael M, 1997. "The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 400-421, August.
    3. Trezzi, Riccardo & Porcelli, Francesco, 2014. "Reconstruction Multipliers," Finance and Economics Discussion Series 2014-79, Board of Governors of the Federal Reserve System (US), revised Jan 2016.
    4. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
    5. Wataru Miyamoto & Thuy Lan Nguyen & Dmitriy Sergeyev, 2018. "Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 247-277, July.
    6. Martin Beraja & Erik Hurst & Juan Ospina, 2016. "The Aggregate Implications of Regional Business Cycles," NBER Working Papers 21956, National Bureau of Economic Research, Inc.
    7. William D. Dupor, 2013. "Creating jobs via the 2009 recovery act: state medicaid grants compared to broadly-directed spending," Working Papers 2013-035, Federal Reserve Bank of St. Louis.
    8. Fitzgerald, Terry J. & Nicolini, Juan Pablo, 2014. "Is There a Stable Relationship between Unemployment and Future Inflation? Evidence from U.S. Cities," Working Papers 713, Federal Reserve Bank of Minneapolis.
    9. Lukas Buchheim & Martin Watzinger, 2017. "The Employment Effects of Countercyclical Infrastructure Investments," CESifo Working Paper Series 6383, CESifo Group Munich.
    10. Eric Zwick & James Mahon, 2017. "Tax Policy and Heterogeneous Investment Behavior," American Economic Review, American Economic Association, vol. 107(1), pages 217-248, January.
    11. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
    12. Markus Brückner & Anita Tuladhar, 2014. "Local Government Spending Multipliers and Financial Distress: Evidence from Japanese Prefectures," Economic Journal, Royal Economic Society, vol. 124(581), pages 1279-1316, December.
    13. Joshua K. Hausman, 2016. "Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus," American Economic Review, American Economic Association, vol. 106(4), pages 1100-1143, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Case for Strengthening Automatic Fiscal Stabilizers
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2019-06-24 11:56:55

    Citations

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


    Cited by:

    1. Benjamin A. Austin & Edward L. Glaeser & Lawrence H. Summers, 2018. "Jobs for the Heartland: Place-Based Policies in 21st Century America," NBER Working Papers 24548, National Bureau of Economic Research, Inc.
    2. repec:bpj:bejmac:v:19:y:2019:i:1:p:32:n:6 is not listed on IDEAS
    3. Kilian Huber, 2018. "Disentangling the Effects of a Banking Crisis: Evidence from German Firms and Counties," American Economic Review, American Economic Association, vol. 108(3), pages 868-898, March.
    4. Ercolani Valerio & Pavoni Nicola, 2019. "The Precautionary Saving Effect of Government Consumption," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(1), pages 1-32, January.
    5. Cerqua, Augusto & Pellegrini, Guido, 2018. "Local multipliers at work," MPRA Paper 85326, University Library of Munich, Germany.
    6. Hollmayr, Josef & Kuckuck, Jan, 2018. "Fiscal multipliers of central, state and local government and of the social security funds in Germany: Evidence of a SVAR," Discussion Papers 28/2018, Deutsche Bundesbank.
    7. repec:bin:bpeajo:v:49:y:2019:i:2018-01:p:151-255 is not listed on IDEAS
    8. repec:red:issued:18-119 is not listed on IDEAS
    9. Eduardo A. Haddad & Natalia Q. Cotarelli, Vinicius A. Vale, 2018. "On the Numerical Structure of Local and Nationwide Government Spending Multipliers: What Can We Learn from the Greek Crisis?," Working Papers, Department of Economics 2018_05, University of São Paulo (FEA-USP).
    10. Dupor, William D. & Rodrigo , Guerrero, 2017. "The Aggregate and Relative Economic Effects of Medicaid and Medicare Expansions," Working Papers 2017-27, Federal Reserve Bank of St. Louis.
    11. Kirill Borusyak & Xavier Jaravel, 2018. "The Distributional Effects of Trade: Theory and Evidence from the United States," 2018 Meeting Papers 284, Society for Economic Dynamics.
    12. François Geerolf & Thomas Grjebine, 2018. "Property Tax Shocks and Macroeconomics," Working Papers 2018-03, CEPII research center.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

    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:aea:aejpol:v:11:y:2019:i:2:p:1-34. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.