Friday, February 25, 2011

Try printing the abstract

We use state and county level variation to examine the impact of the American Recovery and Reinvestment 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.
So what the study says, if you eliminate Romer and her allegiance to teachers unions, then the stimulus could have done a much better job. Which begs the question, how do we eliminate Romer?

Oh yes, we apply a government economic model, the election, where we see Gov Walker doing a good job of eliminating the Romer policy and thus raising state government multipliers.

Thank you Krugman and Baker for pointing out what Thoma tries to hide from us, public unions have very low multipliers. 

But, key, Krugman is getting into Hidalgo-hausmann in Small is Beautiful. The real issue behind low density states having low unemployment is hat low density staes have less income spread. Large dense cities support lengthy production chains so in a recession a reduction in chain length implies a much larger layoff rate, the employment reduction goes as NlogN, the same as the spread on the minimal spanning tree of distribution. The more dense the economy, the larger the rank, N, and the greater the NlogN.

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