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Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession?

Mario J. Crucini, Nam T. Vu

NBER Working Paper No. 24093
Issued in December 2017, Revised in July 2019
NBER Program(s):Economic Fluctuations and Growth Program, International Finance and Macroeconomics Program, Public Economics Program

One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was "to assist those most impacted by the recession." To consider this facet, the ARRA is assessed along this dimension using the concept of risk-sharing. We estimate a trend-stationary autoregressive model of county-level wage income dynamics with each county subject to an idiosyncratic shock and a common shock (with county-specific factor loading). These shocks are used to estimate a redistributive fiscal policy function. The fiscal-offset is 33.6% for the common shock and 6.64% for the county-specific shock. Both of these fiscal policy parameters are statistically and economically significant.

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Document Object Identifier (DOI): 10.3386/w24093

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