Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Recovery and Reinvestment Act
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.
We thank Samuel Farnham for expert research assistance and the Institute for Education Science for generous funding. Doug Staiger and David Weil provided very helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Support programs for low-income households and infrastructure spending were highly expansionary, while grants to states for education do...