Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments

Steven Pennings

American Economic Review, 2021, vol. 111, issue 5, 1689-1719

Abstract: US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit 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.

JEL-codes: E12 E32 E62 H23 H55 R12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (18)

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DOI: 10.1257/aer.20190240

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