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Title: Estimating the Incidence of Government Spending

Citation Type: Miscellaneous

Publication Year: 2011

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Abstract: We propose a new identification strategy to measure the causal impact of government spending on the economy. Our methodology isolates exogenous cross-sectional variation in government spending using a novel instrument. We use the fact that a large number of federal spending programs depend on local population levels. Every ten years, the Census provides a count of local populations. Since a different method is used to estimate non-Census year populations, the discontinuous change in methodology leads to variation in the allocation of billions of dollars in federal spending. Our IV estimates imply that government spending has a local income multiplier of 1.88 and an estimated cost per job of $30,000 per year. We also show that the local effects are not larger than aggregate effects at the MSA and state levels. Finally, we characterize the heterogeneity of the impacts of government spending and find that it has a higher impact in low growth areas

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Authors: Wingender, Philippe; Suarez Serrato, Juan

Publisher: University of California, Berkeley

Data Collections: IPUMS USA

Topics: Other

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