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Did the Stimulus Stimulate?


Economists Fryer and Sacerdote estimate that each additional job cost as much as $400,000

“Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Readjustment and Recovery Act”

NBER Working Paper No. w16759
JAMES FEYRER, Dartmouth College BRUCE SACERDOTE, Dartmouth College

We use state and county level variation to examine the impact of the American Readjustment and Recovery Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending. Time series analysis at the state level suggests a smaller response with a per job cost of about $400,000. These results imply Keynesian multipliers between 0.5 and 1.0, somewhat lower than those assumed by the administration. However, the overall results mask considerable variation for different types of spending. Grants to states for education do not appear to have created any additional jobs. Support programs for low income households and infrastructure spending are found to be highly expansionary. Estimates excluding education spending suggest fiscal policy multipliers of about 2.0 with per job cost of under $100,000.

Mark Thornton is a Senior Fellow at the Mises Institute and the book review editor of the Quarterly Journal of Austrian Economics. He has authored seven books and is a frequent guest on national radio shows.

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