When Regional Isn’t Aggregate: Joint Estimation of Government Transfer Multipliers

Timothy Conley, Bill Dupor, Rong Li and Yijiang Zhou ()

No 2025-028, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We develop a framework that jointly identifies local and aggregate effects of government transfer shocks with cross-state spillovers. Using the Romer–Romer Social Security transfer-adjustment series and state personal income, we combine aggregate time-series variation with cross-sectional exposure to recover the local, spillover, and aggregate multipliers. The specification is aggregation-consistent: state coefficients sum to the aggregate response, making the decomposition of the national effect into local and spillover components transparent. The aggregate multiplier is positive and roughly half the local multiplier, with both statistically different from zero. Spillover estimates are negative but imprecise. Estimates are robust to controls for business cycle factors.

Keywords: local-spillover decomposition; government transfers; social security (search for similar items in EconPapers)
JEL-codes: E62 J32 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2025-10-07
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:101912

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DOI: 10.20955/wp.2025.028

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