Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession? / Mario J. Crucini, Nam T. Vu.

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Crucini, Mario J

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24093.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was "to assist those most impacted by the recession." To consider this facet, the grants-in-aid portion of the ARRA is assessed from the perspective of fiscal federalism. We estimate a trend-stationary autoregressive model of county-level wage income dynamics where each county is subject to a common shock (with county-specific factor loading) and an idiosyncratic shock. We then ask if counties that experienced larger negative wage income shocks during the Great Contraction subsequently received more transfers per capita in the form of grants-in-aid. The fact that the negative business cycle shocks pre-date the passage of the ARRA and subsequent disbursements allows identification of the risk-pooling channel of the grants before fiscal multiplier effects confound these two channels. We find statistically significant and economically large risk-pooling effects.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w24093 (Browse shelf(Opens below))	Not For Loan

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December 2017.

One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was "to assist those most impacted by the recession." To consider this facet, the grants-in-aid portion of the ARRA is assessed from the perspective of fiscal federalism. We estimate a trend-stationary autoregressive model of county-level wage income dynamics where each county is subject to a common shock (with county-specific factor loading) and an idiosyncratic shock. We then ask if counties that experienced larger negative wage income shocks during the Great Contraction subsequently received more transfers per capita in the form of grants-in-aid. The fact that the negative business cycle shocks pre-date the passage of the ARRA and subsequent disbursements allows identification of the risk-pooling channel of the grants before fiscal multiplier effects confound these two channels. We find statistically significant and economically large risk-pooling effects.