Demand Stimulus as Social Policy

Alan Auerbach, Yuriy Gorodnichenko and Daniel Murphy
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Daniel Murphy: University of Virginia

No 15568, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We exploit a panel of city-level data with rich demographic information to estimate the distributional effects of Department of Defense spending and its effects on a range of social outcomes. The income generated by defense spending accrues predominantly to households without a bachelor's degree. These households as well as Black households tend to disproportionately benefit from this spending. Defense spending also promotes a range of beneficial social outcomes that are often targeted by government programs, including reductions in poverty, divorce rates, disability rates, and mortality rates, as well as increases in homeownership, health insurance rates, and occupational prestige. We compare the effects of defense spending with the effects of general demand shocks and explore reasons for the differential effects of the shocks.

Keywords: fiscal policy; inequality; social policy (search for similar items in EconPapers)
JEL-codes: E6 H3 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-09
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Citations: View citations in EconPapers (1)

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Working Paper: Demand Stimulus as Social Policy (2022)
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