Even before the legislation was passed, Bernstein and Romer (2009) reported that 3.6 million jobs
would be created or saved by the then envisioned legislation, relative to a no stimulus act baseline.
This was based on existing estimates of scal policy multipliers. Their estimates included both the
tax and spending components of the ARRA.
Congressional Budget Oce (2010) estimates that the employment increase \attributable to the
ARRA" was in the range of 500 to 900 thousand in 2009 and is in the range of 1.3 to 3.3 million for
2010. Their ranges are computed based on both government spending as well as tax cut incentives
in the Act. To construct these numbers (in their Table 1), they divide the total spending of the
ARRA into its components and then apply low and high output multipliers. These multipliers were
delivered from previous studies.
The Council of Economic Advisors (2010) measures the employment increase due to the Act in
two dierent ways. First, using a multiplier approach similar to the Congressional Budget Oce,
the CEA estimates that the Act had the eect of increasing employment by 2.5 million workers
(Table 4). Second, the CEA estimates a vector autoregression which includes employment from
1990:Q1 to 2007:Q4. Based on those parameter estimates, they forecast gross domestic product
for the period after the Act's implementation. They then interpret the vector autoregression's
forecast error for employment from 2009:Q2 to 2010:Q2 as being due to the policy. According to
these estimates (Table 5), at the end of 2010:Q2, the Act had increased employment by 3.6 million
workers.
Blinder and Zandi (2010) nd that the employment increase due to the ARRA (including both
spending and tax cuts) was 2.7 million jobs. Their estimate is based on the Moody Analytics model
of the U.S. economy, which is a statistical model that includes restrictions based upon standard
Keynesian assumptions.
Wilson (2011) estimates the job eects of the Recovery Act using state-level variation in a
manner similar to ours. He instruments for endogenity using two cost estimates for the ARRA
that existed prior to the Act's passage. He considers the eect on employment at dierent horizons
following the ARRA's implementation. For employment through October 2010, he nd that there
were 800 thousand additional jobs because of the stimulus. This is close to our \best case" scenario
for the ARRA described in the previous section.
While Wilson's above number is relatively small compared to other studies, he does nd larger
employment eects at a more short-run horizon. When evaluating the employment growth through
February rather than October of 2010, Wilson nds that the Act saved/created 2.3 million jobs.
Feyrer and Sacerdote (2011) conduct both a cross-sectional and time series analysis to estimate
the employment eects of the ARRA. Based on state-level data, their cross-section estimate implies
that the Act created/saved 1.9 million jobs, while their time series estimate implies that the Act
created/saved approximately 845 thousand jobs.37
The most crucial dierence between their analysis and ours may be aggregation. In their
regressions, the jobs eect is restricted to be identical across employment sectors. Our modest
disaggregation into four sectors demonstrates that dierent sectors responded dierently to ARRA
aid. First, we are able to reject statistically the hypothesis of identical sector responses. Sec-
ond, these dierences are also quantitatively important. Third, the dierent trend behavior, over
the last decade, across sectors suggests dierent employment processes are at work. Finally, the
practical consideration that much aid
owed through state and local governments suggests that
government employment should be treated dierently than private-sector employment. Also, dif-
ferences between our results and theirs might be explained by the dierences in instruments; Feyrer
and Sacerdote (2011) use the average seniority of members of the U.S. House of Representations to
control for endogenity.
Cogan and Taylor (2010a) look at Bureau of Economic Analysis data on government purchases
of goods and services.38 They nd that most government purchases occurred at the Federal rather
than state and local level and that these purchases account for only 2% of ARRA aid. They argue
that state and local governments did not make purchases of goods and services, but rather increased
transfer payments and reduced borrowing. As such, there was only a negligible impact of the Act
on aggregate output and employment. While our analysis conrms the fact that much funding
went through states, it is not clear whether wages and salaries of government workers are fully
or even partially captured by the National Income and Product Account measures of government
purchases.