Local Fiscal Multipliers and Fiscal Spillovers in the United States

46 Pages Posted: 23 Jan 2019

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Daniel Murphy

University of Virginia - Darden School of Business

Date Written: January 2019

Abstract

We estimate local fiscal multipliers and spillovers for the United States using a rich dataset based on U.S. Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity.

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Suggested Citation

Auerbach, Alan Jeffrey and Gorodnichenko, Yuriy and Murphy, Daniel, Local Fiscal Multipliers and Fiscal Spillovers in the United States (January 2019). NBER Working Paper No. w25457. Available at SSRN: https://ssrn.com/abstract=3319682

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.econ.berkeley.edu/~ygorodni/index.htm

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Germany

Daniel Murphy

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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