The Effect of the Recovery Act on Consumer Spending

Marianna Kudlyak, M. Saif Mehkari, Bill Dupor and Marios Karabarbounis
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M. Saif Mehkari: University of Richmond

No 707, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We analyze the effect of the spending component of the Recovery Act (2009-2012) on consumer spending, namely retail and auto purchases. We find a that a $1 increase in county-level government spending, increased county-level retail spending by $0.20, and auto spending by $0.05. We translate these regional estimates into aggregate effects using a novel quantitative model. We explicitly model several spillover channels through which government spending may spread across regions, such as trade in intermediate goods, a federal tax union, and a currency union. However, we also allow for heterogeneity and incomplete markets within each region. We simulate regional government spending shocks and analyze their effect on local consumer spending.

Date: 2017
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:707

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