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Keywords:American Recovery and Reinvestment Act of 2009 

Working Paper
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.
AUTHORS: Nelson, Lisa; Ergungor, O. Emre
DATE: 2012

Working Paper
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 immediately after the ARRA was passed, according to the Wall Street Journal and the Center for American Progress. To control for the counterfactual ? what would have happened without the stimulus ? I include several variables likely to be strong predictors of state employment growth. The results point to substantial heterogeneity in the impact of ARRA spending over time, across sectors, and across types of spending. The estimated jobs multiplier for total nonfarm employment is large and statistically significant for ARRA spending through March 2010, but falls considerably and becomes insignificant in April and May. The implied number of jobs created or saved by the spending is about 2.0 million as of March, but drops to 0.8 million as of May. Across sectors, the estimated impact of ARRA spending on construction employment is especially large, implying a 18.4% increase in employment (as of May 2010) relative to what it would have been without the ARRA. Lastly, I find that spending on infrastructure and other general purposes has a large positive impact, while spending on safety-net programs such as unemployment insurance and Medicaid reduces employment.
AUTHORS: Wilson, Daniel J.
DATE: 2010

Journal Article
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.
AUTHORS: Wilson, Daniel J.
DATE: 2009

Working Paper
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 system strongly predicts the cross-state distribution of the ARRA highway grants and we use this layout as an alternative instrument. We find that states increased highway spending in 2010 nearly dollar-for-dollar with their apportioned grants, implying little if any crowd-out. Moreover, we find that over the entire 2009-2011 period, ARRA highway grants crowded in highway spending, resulting in roughly two dollars in spending for each dollar in grants. We show that our results are not unique to the ARRA period, but rather are consistent with a strong effect from grants dating back at least to the early 1980s. This latter result contrasts with earlier research (Knight 2002) and we document the sources of the difference.
AUTHORS: Wilson, Daniel J.; Leduc, Sylvain
DATE: 2013

Journal Article
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 the American Recovery and Reinvestment Act (ARRA) of 2009 to aid states in fiscal distress and provide economic stimulus. Though intended as insurance for fiscal distress, ARRA covers at most $0.23 of each dollar of a state?s recession-induced budget gap. These funds are provided through a large per capita payment to each state, independent of any level of state deficit. AARA was also intended as targeted assistance for stimulating local economies, but its funding is uncorrelated with state unemployment rates. ARRA funding appears to be decided by congressional politics, given Congress?s desire to pass a major spending and tax relief package as quickly as possible. States are important ?agents? for federal macroeconomic policy, but agents with their own needs and objectives.
AUTHORS: Inman, Robert P.
DATE: 2010-10

Journal Article
Commentary on \\"states in fiscal distress\\"
AUTHORS: Rothstein, Paul
DATE: 2010-10

Working Paper
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 welfare aid, as separate fiscal policies in addition to federal government purchases and federal net taxes on household and firms. A narrative analysis provides an alternative identification strategy. To better understand the estimated aggregate effects of aid on the economy, we also estimate a behavioral model of state responses to such assistance. The analysis reaches three conclusions. First, aggregate federal transfers to state and local governments are less stimulative than are transfers to households and firms. It is important to evaluate the two policies separately. Second, within intergovernmental transfers, matching (price) transfers for welfare spending are more effective for stimulating GDP growth than are unconstrained (income) transfers for project spending. Matching aid is fully spent on welfare services or middle-class tax relief; half of project aid is saved and only slowly spent in future years. Third, simulations using the SVAR specification suggest ARRA assistance would have been 30 percent more effective in stimulating GDP growth had the share spent on government purchases and project aid been fully allocated to private sector tax relief and to matching aid to states for lower-income support.
AUTHORS: Inman, Robert P.; Carlino, Gerald A.
DATE: 2013

Working Paper
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 and Reinvestment Act of 2009 (ARRA) to stimulate the economy returned fiscal policy, and in particular the role of state and local governments in such policies, to the center of macro-economic policymaking. In a companion paper, we use federal grants-in-aid to state and local governments to provide an evaluation of the effectiveness of the ARRA. The purpose of this paper is to develop narrative measures of the federal grants-in-aid programs beginning with the Federal Highway Act of 1956 through the ARRA of 2009. The narrative measures we develop will be used as instruments for federal grants-in-aid in our subsequent analysis of the ARRA.
AUTHORS: Inman, Robert P.; Carlino, Gerald A.
DATE: 2012

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