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Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?

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  • Gabriel Chodorow-Reich

Abstract

A geographic cross-sectional fiscal spending multiplier measures the effect of an increase in spending in one region of a monetary union. Empirical studies of such multipliers have proliferated. I review this research and what the evidence implies for national multipliers. Based on an updated analysis of the ARRA and a survey of empirical studies, my preferred point estimate for a cross-sectional multiplier is 1.8. The paper also discusses conditions under which the cross-sectional multiplier provides a rough lower bound for the national, no-monetary-policy-response multiplier. Putting these elements together, the cross-sectional evidence suggests a national no-monetary-policy-response multiplier of 1.7 or above.

Suggested Citation

  • Gabriel Chodorow-Reich, 2019. "Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 1-34, May.
    • Handle: RePEc:aea:aejpol:v:11:y:2019:i:2:p:1-34
    Note: DOI: 10.1257/pol.20160465
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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