Cross-Region Transfers in a Monetary Union: Evidence from the US and Some Implications

Steven Michael Pennings

No 9244, Policy Research Working Paper Series from The World Bank

Abstract: US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus packages and earlier permanent Social Security increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.

Keywords: Plastics&Rubber Industry; Common Carriers Industry; Construction Industry; Business Cycles and Stabilization Policies; Food&Beverage Industry; Pulp&Paper Industry; General Manufacturing; Textiles; Apparel&Leather Industry; Economic Growth; Economic Theory&Research; Industrial Economics; Employment and Shared Growth; Wages; Compensation&Benefits (search for similar items in EconPapers)
Date: 2020-05-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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