Reassessing the Cross-Sectional Fiscal Multiplier: Evidence from U.S. Defense Procurement, 1966-2019

Gianluca Pallante

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: This paper revisits the empirical analysis of Nakamura and Steinsson (2014). I reconstruct and extend the original dataset to cover the period 1966-2019, harmonizing two major sources of data: the Defense Contract Action Data System (DCADS) and USAspending.gov. I discuss how to aggregate these contract-level data to better capture spending more directly tied to domestic stimulus. Estimated multipliers are slightly lower in narrow replications but increase when incorporating later fiscal episodes. I also assess the validity and the stability of cross-sectional estimates. While some heterogeneity exists, dispersion in state-level responses remains within reasonable boundaries, especially when accounting for dynamic persistence.

Keywords: Fiscal Policy; Government expenditures; Cross-sectional multipliers; Defense Procurement (search for similar items in EconPapers)
Date: 2025-04-29
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