Friday, October 05, 2012


Here is an excellent compendium of the recent recent on the effects of stimulus spending.

In this post, I’ve pulled together my summaries of the original nine papers, and added sections on the six new additions to the literature. The critical issue in these studies concerns the “fiscal multiplier” — that is, how much bang the government gets for its stimulus buck. For example, if each dollar spent on a particular kind of tax cut results in a $1 increase in GDP, the multiplier for that tax cut is 1. Any multiplier that is greater than zero indicates a program is stimulative, but the higher the multiplier, the more effective stimulus spending is.
Here a a reply of sorts. It points out the limitations of the research, by noting the following:

Stimulus Advocates Largely Ignore the Public Choice Problems with Implementing Stimulus.

Stimulus Advocates Often Brush Past Long Run / Short Run Distinctions.

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