Wednesday, February 9, 2011

Unstimulated by the Stimulus

... is how I read a new working paper James Feyrer and Bruce Sacerdote. They ask "Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Readjustment and Recovery Act" and answer perhaps for some agencies but overall, no.

We use state and county level variation to examine the impact of the American Readjustment and Recovery Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending. Time series analysis at the state level suggests a smaller response with a per job cost of about $400,000. These results imply Keynesian multipliers between 0.5 and 1.0, somewhat lower than those assumed by the administration. However, the overall results mask considerable variation for different types of spending. Grants to states for education do not appear to have created any additional jobs. Support programs for low income households and infrastructure spending are found to be highly expansionary. Estimates excluding education spending suggest fiscal policy multipliers of about 2.0 with per job cost of under $100,000.

But, hey, it only cost us a trillion dollars to find out.

1 comment:

  1. Seems like this may make a case for a more focused stimulus, especially on low income people and actual infrastructure. Spending spread out for a bunch of constituencies doesn't work.