TY  - RPRT
        AU  - Dupor, Bill
AU  - Karabarbounis, Marios
AU  - Kudlyak, Marianna
AU  - Mehkari, M. Saif
        TI  - Regional Consumption Responses and the Aggregate Fiscal Multiplier
        PY  - 2022/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15255
        UR  - https://www.iza.org/publications/dp15255
        AB  - We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in the Nielsen scanner data and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases local non-durable consumer spending by $0.29 and local auto spending by $0.09. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents, incomplete markets, and trade linkages. Our model is consistent with the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. At the zero lower bound, the aggregate consumption multiplier is twice as large as the local multiplier because trade linkages propagate the effect of government spending across regions.
        KW  - fiscal multiplier
KW  - regional variation
KW  - heterogeneous agents
KW  - consumer spending
        ER  -