Arbeitspapier
Political connections, allocation of stimulus spending, and the jobs multiplier
Using American Recovery and Reinvestment Act (ARRA) data, we show that firms lever their political connections to win stimulus grants and that public expenditure channeled through politically connected firms hinders job creation. We build a unique database that links information on campaign contributions, state legislative elections, firm characteristics, and ARRA grant allocation. Using exogenous variation in political connections based on ex-post close elections held before ARRA, we causally show that politically connected firms are 38 percent more likely to secure a grant. Based on an instrumental variable approach, we also establish that a one standard deviation increase in the share of politically connected ARRA spending lowers the number of jobs created per $1 million spent by 7.1 jobs. Therefore, the impact of fiscal stimulus is not only determined by how much is spent, but also by how the expenditure is allocated across recipients.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 2021-13
- Classification
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Wirtschaft
Firm Behavior: Empirical Analysis
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Fiscal Policy
National Government Expenditures and Related Policies: Procurement
Capitalist Systems: Political Economy
- Subject
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campaign finance
state grants
public expenditure allocation
American Recovery and Reinvestment Act
- Event
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Geistige Schöpfung
- (who)
-
Choi, Joonkyu
Penciakova, Veronika
Saffie, Felipe
- Event
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Veröffentlichung
- (who)
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Federal Reserve Bank of Atlanta
- (where)
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Atlanta, GA
- (when)
-
2021
- DOI
-
doi:10.29338/wp2021-13
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Choi, Joonkyu
- Penciakova, Veronika
- Saffie, Felipe
- Federal Reserve Bank of Atlanta
Time of origin
- 2021
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