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Local Fiscal Multipliers and Fiscal Spillovers in the USA

Alan Auerbach, Yuriy Gorodnichenko and D Murphy

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: We estimate local fiscal multipliers and spillovers for the USA using a rich dataset based on the US Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity.

Keywords: E62; H5; Applied Economics; Banking; Finance and Investment; Economics; Banking; Finance and Investment (search for similar items in EconPapers)
Date: 2020-03-01
New Economics Papers: this item is included in nep-mac and nep-ure
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