Breaking Down the US Employment Multiplier Using Micro-Level Data

Edoardo Briganti, Holt Dwyer, Ricardo Duque Gabriel and Victor Sellemi

Staff Working Papers from Bank of Canada

Abstract: Using newly matched data on US defense contracts and restricted administrative employment data, we show that the employment effects of defense procurement are costly, concentrated and slow to diffuse. Large, existing contractors drive initial employment gains that come at a high cost of approximately US$290,000 per job-year. While employment in non-contracting firms is crowded out on impact, positive spillovers emerge gradually and account for half of regional employment gains by the third year after a spending shock, suggesting delayed but persistent medium-term gains across industries. Among contractors, only 15% of job creation occurs at establishments that receive defense contracts, highlighting the role of supply chain linkages.

Keywords: Fiscal; policy (search for similar items in EconPapers)
JEL-codes: E62 H57 J21 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025-02
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:25-8

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