Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments
- American Economic Review (Forthcoming)
US federal transfers to individuals are large, countercyclical, vary
geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit increases. States that received larger transfers tended to grow
faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model.
At business cycle frequencies, cross-region transfer multipliers are
not large, suggesting only modest gains in regional stabilization
from US federal automatic stabilizers.
Forthcoming Article Downloads