Nam T. Vu
Farmer School of Business
800 E. High St.
Oxford, OH 45056
Institutional Affiliation: Miami University FSB/Economics
NBER Working Papers and Publications
|December 2017||Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession?|
with : w24093
One of the statements of purpose of the American Recovery and Reinvestment Act (ARRA) was “to assist those most impacted by the recession.” To consider this facet, the grants-in-aid portion of the ARRA is assessed from the perspective of ﬁscal federalism. We estimate a trend-stationary autoregressive model of county-level wage income dynamics where each county is subject to a common shock (with county-speciﬁc factor loading) and an idiosyncratic shock. We then ask if counties that experienced larger negative wage income shocks during the Great Contraction subsequently received more transfers per capita in the form of grants-in-aid. The fact that the negative business cycle shocks pre-date the passage of the ARRA and subsequent disbursements allows identiﬁcation of the risk-pooling channel ...