Breaking Down the US Employment Multiplier Using Micro-Level Data

Edoardo Briganti, Holt Dwyer, Ricardo Duque Gabriel and Victor Sellemi

Staff Working Papers from Bank of Canada

Abstract: We use restricted data from the Quarterly Census of Employment and Wages to link the universe of US establishments with the universe of contractors in the Federal Procurement Data System. Leveraging detailed institutional knowledge of federal acquisitions, we construct a new dataset of unanticipated contracts and examine their effects on employment growth. We find positive, significant and persistent effects on firms with fewer than 150 employees. Using loan data from the US Federal Reserve (Y14-Q), we show that small firms expand their credit and receive lower interest rates after winning unanticipated contracts. At the regional level, we estimate a cost-per-job of US$57,000 per year using unanticipated contracts—an order of magnitude lower than previous estimates based on all defense contracts. Lastly, we leverage the restricted census data to decompose the employment multiplier into a direct effect on contractors of 55% and an indirect effect on non-contractors of 45%.

Keywords: Fiscal; policy (search for similar items in EconPapers)
JEL-codes: E62 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025-02
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:25-8

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