Did the American Recovery and Reinvestment Act Help Those Most in Need? A County-Level Analysis

Mario J. Crucini, Nam T. Vu

NBER Working Paper No. 24093
Issued in December 2017
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Public Economics

One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was “to assist those most impacted by the recession.” The ARRA is assessed along this dimension using theoretical concepts from the risk-sharing literature. We estimate a model of income dynamics using a county-level panel of wage income in order to isolate the innovation to income. We then regress these income shocks on ARRA transfers and find 13.1% of the shock is offset by the transfer. While this is a long way from complete risk-sharing, the impacts are economically and statistically significant. Surprisingly, there are large state-contingent effects in the second and third quartiles 25.6% and 15.7% versus a mere 8.5% in the first quartile. By this metric, the policy of helping those most in need was not achieved.

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Document Object Identifier (DOI): 10.3386/w24093

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