Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession?

Mario Crucini () and Nam Vu

No 24093, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D31 E3 E62 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-mac
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Published as Mario J. Crucini & Nam T. Vu, 2020. "Did the American Recovery and Reinvestment Act help counties most affected by the Great Recession," Review of Economic Dynamics, .

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Related works:
Journal Article: Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession? (2021)
Working Paper: Did the American recovery and reinvestment act help counties most affected by the great recession? (2019)
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