Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?
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Abstract
A geographic cross-sectional fiscal spending multiplier measures the effect of an increase in spending in one region of a monetary union. Empirical studies of such multipliers have proliferated. I review this research and what the evidence implies for national multipliers. Based on an updated analysis of the ARRA and a survey of empirical studies, my preferred point estimate for a cross-sectional multiplier is 1.8. The paper also discusses conditions under which the cross-sectional multiplier provides a rough lower bound for the national, no-monetary-policy-response multiplier. Putting these elements together, the cross-sectional evidence suggests a national no-monetary-policy-response multiplier of 1.7 or above.Citation
Chodorow-Reich, Gabriel. 2019. "Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?" American Economic Journal: Economic Policy, 11 (2): 1-34. DOI: 10.1257/pol.20160465Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy
- E62 Fiscal Policy
- H54 National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
- H76 State and Local Government: Other Expenditure Categories
- R53 Public Facility Location Analysis; Public Investment and Capital Stock
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