Abstract:
We analyze the extent to which US federal aid to state and local governments during the COVID-19 pandemic had effects that spilled over across state lines. We find that federal assistance had a positive overall effect on state and local government employment that stems largely from the direct effect of states' own aid allocation. To be more precise, we find that each $878,000 in federal assistance created or preserved one state or local job, a third of which was driven by cross-state spillovers. Our analysis of the effects of federal aid on aggregate economic activity generally finds null effects through either direct or spillover channels.
