Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.

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 Office, 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.
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. Second, these differrences 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, differences 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 conrms 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.

On 2011-05-18 06:07, Woland wrote:
Two economists, a Canadian and an American, have calculated the net effect of the American Recovery & Reinvestment Act (the "Stimulus"). It aint pretty.

On 2011-05-18 11:06, Woland wrote:

Canada actually presents an interesting comparative case, though, doesn't it? There has not been a mortgage/real estate meltdown in Canada, in part because the Canadian government never established a program to force banks to write mortgages for people who couldn't afford them, and in part because, unless I am mistaken, a secondary market (and its attendant distortions of risk) for Canadian mortgages does not exist as it does in the US.