Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier

Joonkyu Choi, Veronika Penciakova and Felipe Saffie

No 32574, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the role of firms’ political influence on the effectiveness of government spending using ARRA as a laboratory. Through an IV approach, we show that a 10 percentage points increase in the share of politically connected spending lowers the job creation effect of stimulus by 33 percent at the state level. We exploit ex-post close state-level elections to establish that firms that contributed to winning candidates create fewer jobs after winning grants. Using a quantitative general equilibrium model, we show that politically connected spending also lowers the aggregate jobs multiplier, and that the dampening effect is rationalized by connected firms charging higher markups.

JEL-codes: D72 E62 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-pol and nep-soc
Note: EFG POL
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.nber.org/papers/w32574.pdf (application/pdf)

Related works:
Working Paper: Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier (2021)
Working Paper: Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32574

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32574

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().