American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Does State Fiscal Relief during Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act
American Economic Journal: Economic Policy
vol. 4,
no. 3, August 2012
(pp. 118–45)
(Complimentary)
Abstract
The American Recovery and Reinvestment Act (ARRA) of 2009 included $88 billion of aid to state governments administered through the Medicaid reimbursement process. We examine the effect of these transfers on states' employment. Because state fiscal relief outlays are endogenous to a state's economic environment, OLS results are biased downward. We address this problem by using a state's prerecession Medicaid spending level to instrument for ARRA state fiscal relief. In our preferred specification, a state's receipt of a marginal $100,000 in Medicaid outlays results in an additional 3.8 job-years, 3.2 of which are outside the government, health, and education sectors. (JEL H75, I18, I38, R23)Citation
Chodorow-Reich, Gabriel, Laura Feiveson, Zachary Liscow, and William Gui Woolston. 2012. "Does State Fiscal Relief during Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act." American Economic Journal: Economic Policy 4 (3): 118–45. DOI: 10.1257/pol.4.3.118Additional Materials
JEL Classification
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
- R23 Urban, Rural, Regional, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics