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Tradable Spillovers of Fiscal Policy: Evidence from the 2009 Recovery Act
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https://irle.berkeley.edu/tradable-spillovers-of-fiscal-policy-evidence-from-the-2009-recovery-act/Abstract
Local fiscal policy shocks propagate between labor markets through the trade in intermediate goods used in final production. Through this channel, each $1 of local aid from the 2009 Recovery Act increased output by $1.33 in the rest of the country over two years, in addition to its local state-level effect of $1.46. Combining both the local and spillover effects, absent other offsetting forces, the implied aggregate multiplier from the Recovery Act was approximately 2.8. A sectoral decomposition of the direct and spillover effects is consistent with the spillover effects being mediated through the trade in intermediate goods.
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