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A Cup Runneth Over: Fiscal Policy Spillovers from the 2009 Recovery Act

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  • Bill Dupor
  • Peter B. McCrory

Abstract

This article studies the effects of interregional spillovers from the American Recovery and Reinvestment Act of 2009 (the Recovery Act). Using cross†county commuting data, we cluster US counties into local labour markets, each of which we further partition into two subregions. We then compare differential labour market outcomes and Recovery Act spending at the regional and subregional levels. Among pairs of subregions, we find evidence of fiscal policy spillovers. According to our benchmark specification, $1 of Recovery Act spending in a subregion increases its own wage bill by $0.64 and increases the wage bill in its neighbouring subregion by $0.50 during the first two years following the Act's passage. The spillover effect occurs in the service sector, whereas the direct effect occurs in both the services and goods†producing sector.

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  • Bill Dupor & Peter B. McCrory, 2018. "A Cup Runneth Over: Fiscal Policy Spillovers from the 2009 Recovery Act," Economic Journal, Royal Economic Society, vol. 128(611), pages 1476-1508, June.
    • Handle: RePEc:wly:econjl:v:128:y:2018:i:611:p:1476-1508
    DOI: 10.1111/ecoj.12475
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    1. Daniel J. Wilson, 2012. "Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 251-282, August.
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    5. Dupor, Bill & Mehkari, M. Saif, 2016. "The 2009 Recovery Act: Stimulus at the extensive and intensive labor margins," European Economic Review, Elsevier, vol. 85(C), pages 208-228.
    6. Roel Beetsma & Massimo Giuliodori, 2011. "The Effects of Government Purchases Shocks: Review and Estimates for the EU," Economic Journal, Royal Economic Society, vol. 121(550), pages 4-32, February.
    7. 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.
    8. Jeffrey Clemens & Stephen Miran, 2012. "Fiscal Policy Multipliers on Subnational Government Spending," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 46-68, May.
    9. Gerald A. Carlino & Robert P. Inman, 2013. "Macro fiscal policy in economic unions: states as agents," Working Papers 13-40, Federal Reserve Bank of Philadelphia.
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    11. Bill 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.
    12. Jeffrey Clemens & Stephen Miran, 2012. "Fiscal Policy Multipliers on Subnational Government Spending," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 46-68, May.
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    14. 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.
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    Cited by:

    1. Mario Alloza & Carlos Sanz, 2021. "Jobs Multipliers: Evidence from a Large Fiscal Stimulus in Spain," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 751-779, July.
    2. Dupor, Bill & Guerrero, Rodrigo, 2017. "Local and aggregate fiscal policy multipliers," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 16-30.
    3. Bessho, Shun-ichiro, 2021. "Local fiscal multipliers and population aging in Japan," Japan and the World Economy, Elsevier, vol. 60(C).
    4. Alan Auerbach & Yuriy Gorodnichenko & Daniel Murphy, 2020. "Local Fiscal Multipliers and Fiscal Spillovers in the USA," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(1), pages 195-229, March.
    5. Ziqiao Chen & Giovanni Marin & David Popp & Francesco Vona, 2020. "Green Stimulus in a Post-pandemic Recovery: the Role of Skills for a Resilient Recovery," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 901-911, August.
    6. Bill Dupor & Marios Karabarbounis & Marianna Kudlyak & M Saif Mehkari, 2023. "Regional Consumption Responses and the Aggregate Fiscal Multiplier," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2982-3021.
    7. Chodorow-Reich, Gabriel, 2020. "Regional data in macroeconomics: Some advice for practitioners," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    8. Huber, Kilian, 2021. "Estimating General Equilibrium Spillovers of Large-Scale Shocks," CEPR Discussion Papers 15943, C.E.P.R. Discussion Papers.
    9. Tomomi Miyazaki & Haruo Kondoh, 2022. "Effects of Monetary and Fiscal Policy Interactions on Regional Employment: Evidence from Japan," Discussion Papers 2206, Graduate School of Economics, Kobe University.
    10. Auerbach, Alan & Gorodnichenko, Yuriy & McCrory, Peter B. & Murphy, Daniel, 2022. "Fiscal multipliers in the COVID19 recession," Journal of International Money and Finance, Elsevier, vol. 126(C).
    11. Bill Dupor, 2015. "Local Fiscal Multipliers, Negative Spillovers and the Macroeconomy," Working Papers 2015-26, Federal Reserve Bank of St. Louis.
    12. Bill Dupor & M. Saif Mehkari, 2020. "Schools and Stimulus," Review, Federal Reserve Bank of St. Louis, vol. 102(2), pages 145-171, May.
    13. Steven Gordon, 2019. "The Returns to Lobbying: Evidence from Local Governments in the “Age of Earmarksâ€," Public Finance Review, , vol. 47(5), pages 893-924, September.
    14. Alan J. Auerbach & Yuriy Gorodnichenko & Daniel Murphy, 2019. "Local Fiscal Multipliers and Fiscal Spillovers in the United States," NBER Working Papers 25457, National Bureau of Economic Research, Inc.
    15. Gabriel Chodorow-Reich, 2017. "Geographic Cross-Sectional Fiscal Multipliers: What Have We Learned?," Working Paper 458091, Harvard University OpenScholar.
    16. Bill Dupor, 2017. "So, Why Didn’t the 2009 Recovery Act Improve the Nation’s Highways and Bridges?," Review, Federal Reserve Bank of St. Louis, vol. 99(2), pages 169-182.
    17. repec:hal:spmain:info:hdl:2441/6n4g2a16an9rtamie2eh2rpkkm is not listed on IDEAS

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    More about this item

    JEL classification:

    • 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; Modern Monetary Theory

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