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Who benefits from increased government spending? A state-level analysis

  • Owyang, Michael T.
  • Zubairy, Sarah

We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2011) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus non-military spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While non-military shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in lower-income states.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 3 ()
Pages: 445-464

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Handle: RePEc:eee:regeco:v:43:y:2013:i:3:p:445-464
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