Local Fiscal Multipliers and Fiscal Spillovers in the USA

We estimate local fiscal multipliers and spillovers for the USA using a rich dataset based on the US Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity. JEL Classifications E62 * H5
1 Introduction The strength of fiscal multipliers and spillovers has been the subject of intense debate and considerable empirical research in recent years. An important part of this literature has [...]