Spatial Spillovers and the Effects of Fiscal Stimulus: Evidence from Pandemic-Era Federal Aid for State and Local Governments

Stan Veuger, Beatrice Lee, Jeffrey Clemens and John Kearns
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John Kearns: American Enterprise Institute

AEI Economics Working Papers from American Enterprise Institute

Abstract: We analyze the extent to which US federal aid to state and local governments during the COVID-19 pandemic had effects that spilled over across state lines. We find that federal assistance had a positive overall effect on state and local government employment that stems largely from the direct effect of states’ own aid allocation. To be more precise, we find that each $878,000 in federal assistance created or preserved one state or local job, a third of which was driven by cross-state spillovers. Our analysis of the effects of federal aid on aggregate economic activity generally finds null effects through either direct or spillover channels.

Keywords: COVID-19; Fiscal Stimulus; US Economy (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2022-12
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