Does State Fiscal Relief During Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act

摘要

The American Recovery and Reinvestment Act (ARRA) of 2009 included $88 billion of aid to state governments administered through the Medicaid reimbursement process. We examine the effect of these transfers on statesu27 employment. Because state fiscal relief outlays are endogenous to a stateu27s economic environment, OLS results are biased downward. We address this problem by using a stateu27s pre­ recession Medicaid spending level to instrument for ARRA state fiscal relief In our preferred specification, a stateu27s receipt of a mar­ginal $100,000 in Medicaid outlays results in an additional 3.8job­ years, 3.2 of which are outside the government, health, and education sectors. (JEL H75, 118, 138, R23).