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Local fiscal multipliers of different government spending categories

Author

Listed:
  • Thomas Gemert

    (Maastricht University
    Statistics Netherlands)

  • Lenard Lieb

    (Maastricht University)

  • Tania Treibich

    (OFCE-Sciences Po
    Scuola Superiore Sant’Anna)

Abstract

This paper compares multipliers of different categories of US federal government spending, and in doing so provides a new insight as to why fiscal multipliers may differ across countries and time. We identify exogenous federal government spending shocks at the state level for defense and non-defense spending. Using a projection-based approach, we estimate the cumulative multiplier due to shocks in either of these spending categories. Our results indicate that defense spending yields lower multipliers than non-defense spending. Thus, focusing only on defense spending may result in underestimating the multiplier for government spending.

Suggested Citation

  • Thomas Gemert & Lenard Lieb & Tania Treibich, 2022. "Local fiscal multipliers of different government spending categories," Empirical Economics, Springer, vol. 63(5), pages 2551-2575, November.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:5:d:10.1007_s00181-022-02217-5
    DOI: 10.1007/s00181-022-02217-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; Government spending; Local fiscal multiplier;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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