Using State Pension Shocks to Estimate Fiscal Multipliers since the Great Recession
- (pp. 121-24)
Abstract
Has government spending raised income and employment since 2008? I use new data on state pension returns during the Great Recession to recover exogenous changes in spending. Instrumenting with these return shocks, I estimate that each dollar of windfall-financed spending raised local incomes by $1.43 and every additional $22,011 of spending created one contemporaneous job. These estimates are similar to those found in Shoag (2010) despite the non-overlapping datasets. Unlike Shoag (2010), however, the bulk of the employment increase post-2008 stems from decreases in unemployment rather than increased labor force participation.Citation
Shoag, Daniel. 2013. "Using State Pension Shocks to Estimate Fiscal Multipliers since the Great Recession." American Economic Review, 103 (3): 121-24. DOI: 10.1257/aer.103.3.121Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy
- E62 Fiscal Policy
- G01 Financial Crises
- H55 Social Security and Public Pensions
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes