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Was the American Recovery and Reinvestment Act an Economic Stimulus?
IAAK, University of Bonn, Bonn, Germany .
Karlstad University, Faculty of Arts and Social Sciences (starting 2013), Karlstad Business School (from 2013).ORCID iD: 0000-0003-3719-8594
2017 (English)In: International Advances in Economic Research, ISSN 1083-0898, E-ISSN 1573-966X, Vol. 23, no 4, p. 395-404Article in journal (Refereed) Published
Abstract [en]

The American Recovery and Reinvestment Act (ARRA) of 2009 envisaged a fiscal stimulus of approximately $800 billion, the largest in American history. Chodorow-Reich et al. (2012a) show that the state fiscal relief that was part of this stimulus increases employment. The other objective of ARRA was to "promote economic recovery". We therefore examine its effect on states' economic growth. Since the stimulus each state received is endogenous to a state's economic environment, ordinary least squares underestimates the effect. This endogeneity problem is addressed by using a state's pre-recession Medicaid spending level to instrument for the ARRA fiscal relief each state receives. We find that the ARRA state fiscal relief has indeed had a positive effect on gross state products.

Place, publisher, year, edition, pages
2017. Vol. 23, no 4, p. 395-404
Keywords [en]
American recovery and reinvestment act, State fiscal relief Endogeneity Economic growth
National Category
Economics and Business
Research subject
Economics
Identifiers
URN: urn:nbn:se:kau:diva-65944DOI: 10.1007/s11294-017-9655-7ISI: 000417713000003OAI: oai:DiVA.org:kau-65944DiVA, id: diva2:1177657
Available from: 2018-01-25 Created: 2018-01-25 Last updated: 2019-12-02Bibliographically approved

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Staal, Klaas

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