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The American Recovery and Reinvestment Act: Solely a government jobs program?

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  • Conley, Timothy G.
  • Dupor, Bill

Abstract

This paper estimates the private and government sector employment effects of American Recovery and Reinvestment Act (ARRA) spending via an instrumental variables strategy. We argue that this aid was effectively fungible and states used it to offset declines in revenue. This enables us to use exogenous variation in states’ budget positions to identify the Act's employment effects. We also exploit exogenous variation across states in ARRA highway funding. According to our benchmark estimates, average state and local government employment, during the 24 months following the program's inception, was between 156,000 and 563,000 persons greater as a result of ARRA spending (90% confidence interval). The corresponding estimate for the private sector ranges from a loss of 182,000 to a gain of 1.1 million jobs. Our point estimate for the implied cost of creating a job lasting one year is $202,000, which is substantially larger than the corresponding estimate from the President's Council of Economic Advisors.

Suggested Citation

  • Conley, Timothy G. & Dupor, Bill, 2013. "The American Recovery and Reinvestment Act: Solely a government jobs program?," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 535-549.
  • Handle: RePEc:eee:moneco:v:60:y:2013:i:5:p:535-549 DOI: 10.1016/j.jmoneco.2013.04.011
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    References listed on IDEAS

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    1. Jeffrey Clemens & Stephen Miran, 2012. "Fiscal Policy Multipliers on Subnational Government Spending," American Economic Journal: Economic Policy, American Economic Association, pages 46-68.
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    8. Robert P. Inman, 2010. "States in Fiscal Distress," NBER Working Papers 16086, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Fabian Gunzinger & Jan-Egbert Sturm, 2016. "It's Politics, Stupid! Political Constraints Determined Governments' Reactions to the Great Recession," Kyklos, Wiley Blackwell, vol. 69(4), pages 584-603, November.
    2. Gerald Carlino & Robert P. Inman, 2016. "Fiscal Stimulus in Economic Unions: What Role for States?," Tax Policy and the Economy, University of Chicago Press, pages 1-50.
    3. Price Fishback, 2017. "How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s," Journal of Economic Literature, American Economic Association, pages 1435-1485.
    4. repec:spr:empeco:v:53:y:2017:i:3:d:10.1007_s00181-016-1155-8 is not listed on IDEAS
    5. 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.
    6. Robert S. Chirinko & Daniel J. Wilson, 2016. "Job creation tax credits, fiscal foresight,and job growth: evidence from U.S. States," Working Papers 6, Department of the Treasury, Ministry of the Economy and of Finance.
    7. Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.
    8. repec:eee:moneco:v:92:y:2017:i:c:p:16-30 is not listed on IDEAS
    9. Ando, Michihito, 2013. "How Much Should We Trust Regression-Kink-Design Estimates?," Working Paper Series, Center for Fiscal Studies 2013:15, Uppsala University, Department of Economics.
    10. Andrew Hughes Hallett & Ansgar Rannenberg & Sven Schreiber, 2017. "Reassessing the Impact of the US Fiscal Stimulus: The Role of the Monetary Policy Stance," International Business Research, Canadian Center of Science and Education, pages 12-31.
    11. Buchheim, Lukas & Watzinger, Martin, 2017. "The Employment Effects of Countercyclical Infrastructure Investments," Discussion Papers in Economics 34877, University of Munich, Department of Economics.
    12. Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.
    13. Chris Boone & Arindrajit Dube & Ethan Kaplan, 2014. "The Political Economy of Discretionary Spending: Evidence from the American Recovery and Reinvestment Act," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 375-441.
    14. Ando, Michihito, 2013. "How Much Should We Trust Regression-Kink-Design Estimates?," Working Paper Series 2013:22, Uppsala University, Department of Economics.
    15. repec:kap:iaecre:v:23:y:2017:i:4:d:10.1007_s11294-017-9655-7 is not listed on IDEAS
    16. Chiara Fratto & Harald Uhlig, 2014. "Accounting for Post-Crisis Inflation and Employment: A Retro Analysis," NBER Working Papers 20707, National Bureau of Economic Research, Inc.
    17. 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.
    18. Dupor, Bill & Li, Rong, 2015. "The expected inflation channel of government spending in the postwar U.S," European Economic Review, Elsevier, vol. 74(C), pages 36-56.
    19. Peter McCrory & Bill Dupor, 2015. "Fiscal Policy Spillovers: Points of Employment to Places of Residence," 2015 Meeting Papers 47, Society for Economic Dynamics.
    20. Lukas Buchheim, 2015. "Employment Effects of Stimulus Investments," 2015 Meeting Papers 1455, Society for Economic Dynamics.
    21. Mario J. Crucini & Nam T. Vu, 2017. "Did the American Recovery and Reinvestment Act Help Those Most in Need? A County-Level Analysis," NBER Working Papers 24093, National Bureau of Economic Research, Inc.
    22. Adelino, Manuel & Cunha, Igor & Ferreira, Miguel, 2017. "The Economic Effects of Public Financing: Evidence from Municipal Bond Ratings Recalibration," CEPR Discussion Papers 11811, C.E.P.R. Discussion Papers.

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