Local Fiscal Multipliers and Fiscal Spillovers in the United States
We estimate local fiscal multipliers and spillovers for the United States using a rich dataset based on U.S. Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity.
This paper was presented at the 19th IMF Jacques Polak Annual Research Conference, November 1-2, 2018 and the American Economic Association Annual Meeting, January 4-6, 2019. We are grateful to our discussants, Christopher Erceg and Christoph Boehm, for comments on earlier drafts, and Peter McCrory, Hanna Charankevich, Jianlin Wang, and Chaoran Yu as well as Carlos Paramo, Preethan Gujjula, Naman Priyadarshi, Jeffrey Landes, Lingyun Xiao, and Mihir Gokhale for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.