Interesting numbers on multipliers. The problem I am having is that I am not sure whether these are Keynesian demand multipliers, or something more like Enrico Moretti regional-export multipoliers. The decision by DoD to support a factory in congressional district X looks, to me, a lot like a regional positive productivity shock:

Alan Auerbach, Yuriy Gorodnichenko, and Daniel Murphy: Local Fiscal Multipliers and Spillovers in the US: "Our baseline estimates imply that a dollar of DOD spending in a city increases GDP in that city by a dollar and increases labour earnings by 0.35, and that an increase of DOD spending equal to a percent of local earnings increases employment by 0.2%...

...These estimates are close to the city-level multiplier estimates from Demyanyk et al. (2018).... The spending shocks also have positive effects on nearby localities, increasing earnings in proximate cities by about half of the own-city effect and increasing GDP in other cities across the same state by between half and a whole of the own-city effect. Our estimated state-level GDP multiplier effect of around 1.5 is consistent with the state-level estimates in Nakamura and Steinsson (2014). The positive geographic spillovers imply that any negative spillover effects that operate through factor markets (e.g. pulling in labour from nearby locations) are outweighed by positive demand spillovers (e.g. input-output linkages or induced consumer spending). These findings imply that the increase in local demand is not accommodated by a net reallocation of labour from nearby locations...


#noted

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