Estimating Local Fiscal Multipliers

This paper proposes a new source of cross-sectional variation that may identify causal impacts of Government spending on the economy. It uses the fact that a large number of federal spending programs depend on local population levels. Every ten years, the Census provides a count of local populations. Since a different method is used to estimate non-Census year populations, this change in methodology leads to variation in the allocation of billions of dollars in federal spending. The baseline results follow a treatment-effects framework where the effect of a Census Shock on federal spending, income, and employment growth by re-weighting the data based on an estimated propensity score that depends on lagged economic outcomes and observed economic shocks are estimated [Working Paper 22425]