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Recovery and Reinvestment Act Spending at the State Level: Keynesian Stimulus or Distributive Politics?


  • Russell S. Sobel

    (Department of Economics, West Virginia University)

  • Andrew Young

    (Department of Economics, West Virginia University)


We examine the US state-level pattern of American Recovery and Reinvestment Act (ARRA) spending. We relate spending to (1) Keynesian determinants of countercyclical policy, (2) congressional power and dominance, and (3) presidential electoral vote importance. We find that the ARRA is, in practice, poorly-designed countercyclical stimulus. After controlling for political variables, coefficients on Keynesian variables are often statistically insignificant. When they are statistically significant they are often the “incorrect” sign. On the other hand, statistically significant effects associated with political variables are almost always of the sign predicted by public choice theory. One striking result is that the elasticity of ARRA spending with respect to the pre-ARRA levels of federal grants and payments to state and local governments is between 0.254 and 0.361. States previously capturing large amounts of federal funds continue to do so under the ARRA stimulus.

Suggested Citation

  • Russell S. Sobel & Andrew Young, 2010. "Recovery and Reinvestment Act Spending at the State Level: Keynesian Stimulus or Distributive Politics?," Working Papers 10-17, Department of Economics, West Virginia University.
  • Handle: RePEc:wvu:wpaper:10-17

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    1. John D. Merrifield & Barry W. Poulson, 2016. "A Dynamic Scoring Simulation Analysis of How TEL Design Choices Impact Government Expansion," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(2), pages 60-68, April.
    2. Stuart Kasdin & Luona Lin, 2015. "Strategic behavior by federal agencies in the allocation of public resources," Public Choice, Springer, vol. 164(3), pages 309-329, September.
    3. repec:spr:ecogov:v:18:y:2017:i:4:d:10.1007_s10101-017-0196-6 is not listed on IDEAS
    4. Jennes, Geert & Persyn, Damiaan, 2015. "The effect of political representation on the geographic distribution of income: Evidence using Belgian data," European Journal of Political Economy, Elsevier, vol. 37(C), pages 178-194.
    5. Alberto Batinti, 2016. "NIH biomedical funding: evidence of executive dominance in swing-voter states during presidential elections," Public Choice, Springer, vol. 168(3), pages 239-263, September.
    6. John Considine & Justin Doran, 2016. "Evaluation of an informal rule for the allocation of sports capital funding," Public Choice, Springer, vol. 168(1), pages 43-54, July.
    7. Edward Stringham, 2014. "It’s not me, it’s you: the functioning of Wall Street during the 2008 economic downturn," Public Choice, Springer, vol. 161(3), pages 269-288, December.

    More about this item


    fiscal stimulus; fiscal policy; political economy; public choice; congressional dominance model; American recovery and reinvestment act;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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