Are State Governments Roadblocks to Federal Stimulus? Evidence on the Flypaper Effect of Highway Grants in the 2009 Recovery Act

Sylvain Leduc and Daniel Wilson

American Economic Journal: Economic Policy, 2017, vol. 9, issue 2, 253-92

Abstract: This paper examines how state governments adjusted spending in response to the large temporary increase in federal highway grants under the 2009 American Recovery and Reinvestment Act (ARRA). The mechanism used to apportion ARRA highway grants to states allows one to isolate exogenous changes in these grants. The results indicate that states increased highway spending over 2009 to 2011 more than dollar-for-dollar with the ARRA grants they received. Rent-seeking efforts are shown to help explain this result: states with more political contributions from the public works sector to the governor and state legislators tended to spend more out of their ARRA highway funds than other states.

JEL-codes: H54 H76 R42 R53 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/pol.20140371
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Citations: View citations in EconPapers (52)

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Working Paper: Are State Governments Roadblocks to Federal Stimulus? Evidence on the Flypaper Effect of Highway Grants in the 2009 Recovery Act (2013)
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