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Commentary on \\"states in fiscal distress\\"
Macro fiscal policy in economic unions: states as agents
The American Recovery and Reinvestment Act (ARRA) was the US government?s fiscal response to the Great Recession. An important component of ARRA?s $796 billion proposed budget was $318 billion in fiscal assistance to state and local governments. We examine the historical experience of federal government transfers to state and local governments and their impact on aggregate GDP growth, recognizing that lower-tier governments are their own fiscal agents. The SVAR analysis explicitly incorporates federal intergovernmental transfers, disaggregated into project (e.g., infrastructure) aid and ...
The impact of recovery efforts on residential vacancies
Legislation aimed at stabilizing housing markets since the recession has focused on providing funding to acquire and remediate foreclosed and abandoned homes or providing financial assistance and incentives to purchase homes. Cuyahoga County has received over $100 million in such funds since 2008. We investigate the impact of these funds on vacancy rates. We examine neighborhoods in Cuyahoga County where National Stabilization Program dollars were spent and find that the program helped reduce vacancies in neighborhoods where properties were primarily purchased for consumption purposes.
Are fiscal stimulus funds going to the \\"right\\" states?
Are federal stimulus funds heading to those states best positioned to put the money to good use right away? This Letter compares the degree of economic need in different states with each state's expected share of funds from the American Recovery and Reinvestment Act of 2009.
A narrative analysis of post-World War II changes in federal aid
Because of lags in legislating and implementing fiscal policy, private agents can often anticipate future changes in tax policy and government spending before these changes actually occur, a phenomenon referred to as fiscal foresight. Econometric analysis that fails to model fiscal foresight may obtain tax and spending multipliers that are biased. One way researchers have attempted to deal with the problem of fiscal foresight is by examining the narrative history of government revenue and spending news. The Great Recession and efforts by the federal government through the American Recovery ...
Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act
This paper estimates the ?jobs multiplier? of fiscal spending using the state-level allocations of federal stimulus funds from the 2009 American Recovery and Reinvestment Act (ARRA). Specifically, I estimate the relationship between state-level federal ARRA spending and state employment outcomes from the time the Act was passed (February 2009) through the latest month of data (currently May 2010). Because actual state allocations of stimulus spending may be endogenous with respect to state economic outcomes, I instrument for stimulus spending using the state allocations that were anticipated ...
Are State Governments Roadblocks to Federal Stimulus? Evidence on the Flypaper Effect of Highway Grants in the 2009 Recovery Act
We examine how state governments adjusted spending in response to the large temporary increase in federal grants under the 2009 American Recovery and Reinvestment Act (ARRA). We concentrate our analysis on ARRA highway grants, which were especially likely to crowd out states? own highway funding given the lack of matching requirements and according to past research on federal highway grants. The mechanism used to apportion ARRA highway grants to states allows us to isolate exogenous changes in these grants. In addition, we show that the original 1944 proposed layout of the interstate highway ...
States in fiscal distress
The 2007-10 recession has imposed significant fiscal hardships on state and local governments. The result has been state budget deficits and the need to increase state taxes, cut spending, and withdraw funds from state ?rainy day? accounts. The primary cause of state budget ?gaps? has been the rise in the level of state unemployment. There is no evidence that these gaps are related to state political institutions, a state?s prior receipt of federal funding, or possibly favored access to key congressional budget committees. The federal government has responded to these gaps with the passage of ...