Working Papers
The Fiscal Multiplier of Education Expenditures, with Maarten De Ridder, Simona M. Hannon, and Damjan Pfajfar.
This paper examines the short-run effects of education expenditures on local income and employment. We estimate fiscal multipliers using cross-sectional variation in city-level exposure to the $30-billion Federal Pell Grant Program, which is the largest U.S. program to help low-income students attend college. An increase in Pell grants by 1 percent of a city’s income raises local income by 2.8%and local employment by 1.9% over the next two years, both exceeding estimates for military spending (1.5% on average). The higher multiplier is partly driven by Pell grants enabling students to take up student loans, which further relaxes their budget constraint. Multipliers are higher when grants are awarded to students at non-profit colleges. Multipliers are also higher during recessions than in expansions, suggesting that Pell grants can be an effective tool for countercyclical policy that adds to long-term benefits, such as increasing the affordability of college and fostering long-run growth.
Heterogeneous Fiscal Multipliers: New Shift-Share Evidence from the UK
This paper shows evidence and explains heterogeneity in local fiscal multipliers that is unrelated with differences in local marginal propensities to consume. Instead, local labor market and demographic characteristics play a key role. First, I present evidence from the UK of an average local multiplier of 1.69 and 1.71 for services and capital spending, respectively, using a shift-share IV design leveraging UK councils' reliance on funds from the central government. There are, however, significant inter-council differences in the multiplier which can be explained by workers' skill level and labor inactivity. I further show that this novel heterogeneity cannot be explained by variation in local MPCs and that local spending boosts worker productivity while also improving local social and health conditions. I rationalize these results with a model of heterogeneous labor and productivity shocks that impose a psychological toll to workers' cognitive load capacity. Results show potential gains from removing fiscal misallocation between councils and optimal fiscal policy.
Works in progress
New Goods and Store Reputation: Evidence from Covid-19, with Fraser Clark.
Demand-Driven Innovation: Evidence from the Movie Industry.