Who benefits from increased government spending? A state-level analysis

Michael Owyang and Sarah Zubairy

Regional Science and Urban Economics, 2013, vol. 43, issue 3, 445-464

Abstract: We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2011) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus non-military spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While non-military shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in lower-income states.

Keywords: Fiscal policy; Structural VAR; Government spending (search for similar items in EconPapers)
JEL-codes: C32 E62 R12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Working Paper: Who benefits from increased government spending? a state-level analysis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:43:y:2013:i:3:p:445-464

DOI: 10.1016/j.regsciurbeco.2013.02.005

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