In Search of the Multiplier for Federal Spending in the States During the Great Depression

Abstract

and Omar Farooque provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Regional Transfers

“…40 Interestingly, this range of values is consistent with the estimates of the national (and therefore internallynanced) multiplier surveyed by Ramey (2011a) and reported by Ramey and Zubairy (2017). 28 …”

“…In Table 5 we test whether FPM transfers correlate with state transfers, non-FPM federal transfers 27 Brollo, Nannicini, Tabellini and Perotti (2013) provide cross-sectional evidence that municipalities just above and just below FPM thresholds do not dier on many time-invariant characteristics. 28 After 2004 local councillors pay increases abruptly (by 50%) for municipalities with more than 10, 000 inhabitants, a value close to the rst threshold of 10, 188. Ferraz and Finan (2011) show that the characteristics of councillors dier at this cuto.…”

“…28 One may worry that municipal governments gaining extra FPM funds may decide not to spend them. Likewise, municipalities that receive less FPM funds may obtain additional funding from the state or other federal transfer programs.…”

“…These studies report local multipliers over the post-WWII period in the range of 1.4 to 2.6. Clemens and Miran (2012) nd however subnational government spending multipliers below one; Fishback and Kachanovskaya (2010) and Fishback and Cullen (2013) also nd much lower multipliers for the post-Great Depression spending across U.S. states and for WWII military purchases across U.S. counties, respec-tively. 3 Becker, Egger and von Ehrlich (2010Ehrlich ( , 2013 examine the medium-run growth eects of EU structural fund grants, documenting positive but quite heterogeneous eects.…”

What Was New About the New Deal?

“…They were 17 The impact of public works and relief grants on retail sales and migration is estimated in Kantor (2005 and2006). The state level measures of the impact on per capita income and private employment are found in Fishback and Kachanovskaya (2011). The migration simulations are from Sorensen, Fishback, Kantor, and Allen (2009).…”