Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act

This paper estimates the “jobs multiplier” of fiscal stimulus spending using the state-level allocations of federal stimulus funds from the American Recovery and Reinvestment Act (ARRA) of 2009. Because the level and timing of stimulus funds that a state receives was potentially endogenous, I exploit the fact that most of these funds were allocated according to exogenous formulary allocation factors such as the number of federal highway miles in a state or its youth share of population. Cross-state IV results indicate that ARRA spending in its first year yielded about eight jobs per million dollars spent, or 125, 000 per job. (JEL E24, E62, H72, H75, R23)