Does State Fiscal Relief During Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act

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): 118-145.
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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 pending 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

Notes:

Awarded AEJ: Economic Policy Best Paper Prize, 2013

Last updated on 07/18/2013