Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act
This paper estimates the “jobs multiplier” of fiscal spending using the state-level allocations of federal stimulus funds from the 2009 American Recovery and Reinvestment Act (ARRA). Specifically, I estimate the relationship between state-level federal ARRA spending and state employment outcomes from the time the Act was passed (February 2009) through the latest month of data (currently May 2010). Because actual state allocations of stimulus spending may be endogenous with respect to state economic outcomes, I instrument for stimulus spending using the state allocations that were anticipated immediately after the ARRA was passed, according to the Wall Street Journal and the Center for American Progress. To control for the counterfactual – what would have happened without the stimulus – I include several variables likely to be strong predictors of state employment growth. The results point to substantial heterogeneity in the impact of ARRA spending over time, across sectors, and across types of spending. The estimated jobs multiplier for total nonfarm employment is large and statistically significant for ARRA spending through March 2010, but falls considerably and becomes insignificant in April and May. The implied number of jobs created or saved by the spending is about 2.0 million as of March, but drops to 0.8 million as of May. Across sectors, the estimated impact of ARRA spending on construction employment is especially large, implying a 18.4% increase in employment (as of May 2010) relative to what it would have been without the ARRA. Lastly, I find that spending on infrastructure and other general purposes has a large positive impact, while spending on safety-net programs such as unemployment insurance and Medicaid reduces employment.
|Date of creation:||2010|
|Contact details of provider:|| Postal: P.O. Box 7702, San Francisco, CA 94120-7702|
Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010.
"New Keynesian versus old Keynesian government spending multipliers,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 34(3), pages 281-295, March.
- Cogan, John F. & Cwik, Tobias J. & Taylor, John B. & Wieland, Volker, 2009. "New Keynesian versus old Keynesian government spending multipliers," CFS Working Paper Series 2009/17, Center for Financial Studies (CFS).
- John F. Cogan & Tobias Cwik & John B. Taylor & Volker Wieland, 2009. "New Keynesian versus Old Keynesian Government Spending Multipliers," NBER Working Papers 14782, National Bureau of Economic Research, Inc.
- Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2009. "New Keynesian versus old Keynesian government spending multipliers," Working Paper Series 1090, European Central Bank.
- John Cogan & Tobias Cwik & John Taylor & Volker Wieland, 2009. "New Keynesian Versus Old Keynesian Government Spending Multipliers," Discussion Papers 08-030, Stanford Institute for Economic Policy Research.
- Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2009. "New Keynesian versus old Keynesian government spending multipliers," CEPR Discussion Papers 7236, C.E.P.R. Discussion Papers.
- Monacelli, Tommaso & Perotti, Roberto & Trigari, Antonella, 2010. "Unemployment fiscal multipliers," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 531-553, July.
- Monacelli, Tommaso & Perotti, Roberto & Trigari, Antonella, 2010. "Unemployment Fiscal Multipliers," CEPR Discussion Papers 7728, C.E.P.R. Discussion Papers.
- Tommaso Monacelli & Roberto Perotti & Antonella Trigari, 2010. "Unemployment Fiscal Multipliers," NBER Working Papers 15931, National Bureau of Economic Research, Inc.
- Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "Fiscal Stimulus with Spending Reversals," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 878-895, November.
- Gernot Müller & Giancarlo Corsetti & Andre Meier, 2009. "Fiscal Stimulus with Spending Reversals," IMF Working Papers 09/106, International Monetary Fund.
- Corsetti, Giancarlo & Meier, André & Müller, Gernot, 2009. "Fiscal Stimulus with spending reversals," CEPR Discussion Papers 7302, C.E.P.R. Discussion Papers.
- Michael Woodford, 2011. "Simple Analytics of the Government Expenditure Multiplier," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 1-35, January.
- Woodford, Michael, 2010. "Simple Analytics of the Government Expenditure Multiplier," CEPR Discussion Papers 7704, C.E.P.R. Discussion Papers.
- Michael Woodford, 2010. "Simple Analytics of the Government Expenditure Multiplier," NBER Working Papers 15714, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:fip:fedfwp:2010-17. 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: (Federal Reserve Bank of San Francisco Research Library)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.