Working Paper: NBER ID: w16759
Authors: James Feyrer; Bruce Sacerdote
Abstract: We use state and county level variation to examine the impact of the American Recovery and Reinvestment Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending. Time series analysis at the state level suggests a smaller response with a per job cost of about $400,000. These results imply Keynesian multipliers between 0.5 and 1.0, somewhat lower than those assumed by the administration. However, the overall results mask considerable variation for different types of spending. Grants to states for education do not appear to have created any additional jobs. Support programs for low income households and infrastructure spending are found to be highly expansionary. Estimates excluding education spending suggest fiscal policy multipliers of about 2.0 with per job cost of under $100,000.
Keywords: American Recovery and Reinvestment Act; employment; stimulus spending; Keynesian multipliers
JEL Codes: E6; E62; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stimulus spending (E62) | Employment (J68) |
| Transfers to local governments for education and law enforcement (H79) | Employment (J68) |
| Support for low-income households (H53) | Employment (J68) |
| Stimulus spending (E62) | Keynesian multipliers (E12) |