Measuring State-level Economic Policy Uncertainty
50 Pages Posted: 7 Nov 2020 Last revised: 9 Jan 2021
Date Written: September 18, 2020
We develop 50 novel indices of State-level Economic Policy Uncertainty (SEPU) based on newspaper coverage frequency using 204 million state newspaper articles from January 1990 to December 2019. We assess the validity of our measures. Our SEPU indices vary counter-cyclically with respect to state-specific economic conditions, rise before close gubernatorial elections, and exhibit a large cross-sectional variation. We demonstrate that SEPU indices explain the cross-sectional variation in state-level GDP, employment, income as well as industry investment decisions. Our findings highlight the importance of economic policy uncertainty at the state level in addition to the nationwide level.
Keywords: State-Level Economic Policy Uncertainty Index, News-Based Uncertainty Measure, State-Level Business Cycles
JEL Classification: D80, G12, G18, L50
Suggested Citation: Suggested Citation