Working Papers
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Why Does GDP Move Before Government Spending? It's All in the Measurement 2026
We show that aggregate time series estimates of the fiscal multiplier are systematically biased downwards due to features of National income accounting (NIPA). New military spending first enters GDP as private inventory investment rather than government purchases, so NIPA innovations in government spending are delayed, a measurement problem distinct from fiscal foresight. We use budget data and military contracts to build an alternative measure of defense spending, which leads NIPA government spending by 3-4 quarters. We find an accounting-corrected multiplier—output per dollar that will ultimately be spent—of 1.2 on impact and 1 in the medium run.
This paper puts together three studies:
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Why Does GDP Move Before Government Spending? It's All in the Measurement 2023
We find that the early impact of defense news shocks on GDP is due to a rise in business inventories, as contractors ramp up production for new defense contracts. These contracts do not affect government spending (G) until payment-on-delivery, which occurs 2-3 quarters later. Novel data on defense procurement obligations reveals that contract awards Granger-cause shocks to G identified via Cholesky decomposition, but not defense news shocks. We show that Cholesky shocks to G miss early changes in inventories, and thus result in lower multiplier estimates relative to defense news shocks.
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On the Effects of Government Purchases and Their Transmission Mechanism 2023
Empirical Part of my JMP
I use novel data on defense contracts to study the effects of government purchases in the US and develop new stylized facts about their transmission mechanism. My methodology leverages the construction of a new quarterly series of US military prime contracts, available from 1947:1. Defense contracts: (i) are exogenous to output fluctuations; (ii) retain statistical power and robustness across various samples; (iii) accurately measure the timing of the shocks; and (iv) obviate the need for narrative analysis. My findings indicate that a positive shock to defense contracts, ordered first in a VAR, bolsters output, inventories, non-durable-plus-service consumption, hours worked, employment, labor earnings, disposable income, the price-cost markup, the product-wage, and labor productivity. I argue that the observed gains in labor productivity stem from “learning-by-doing,” a feature particularly relevant to the production of military items. Further, leveraging a two-sector RBC model, I demonstrate that the learning-by-doing induced productivity enhancements in the manufacturing sector suffice to increase aggregate consumption, rationalizing the VAR evidence.
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When Does Government Spending Matter? Evidence from a New Measure of Defense Spending 2022
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The Network Effects of Fiscal Adjustment Plans 2018
New version available by Fall 2026
PDF Rej&R at European Economic ReviewWe investigate the effects of fiscal consolidations in the United States and their propagation through the production network. Using a narrative approach, we identify exogenous fiscal adjustments and employ a spatial autoregression (SAR) model to separate the total effects of these adjustments into direct and network components. Our analysis reveals that tax-based consolidations have a more pronounced recessionary impact than expenditure-based ones, with approximately 27% of the total effect of tax-based consolidations attributable to network spillovers, compared to 11% for expenditure-based plans. A quarter of this difference in their total output effect is attributable to the stronger network propagation of tax increases compared to government spending cuts.
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Breaking Down the US Employment Multiplier Using Micro Level Data 2024
Using newly matched U.S. defense contract and restricted administrative employment data, we show that the regional employment effects of defense procurement are costly, concentrated, and slow to diffuse. Employment gains are initially driven by large existing contractors and come at a high cost of approximately $290,000 per job-year, well above benchmark estimates in the fiscal policy literature. Non-contractors are crowded out on impact, but positive spillovers emerge gradually and account for more than half of regional employment gains by the third year. A newly identified set of unanticipated contracts reveals persistent employment gains at recipient establishments, but these account for only about 18% of contractor job creation within one year, with the remainder arising through indirect channels within contractor networks.
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High-Frequency Cross-Sectional Identification of Military News Shocks 2025
This study develops a two-step procedure to identify and quantify fiscal news shocks. First, we augment a narrative identification strategy using Large Language Model searches to compile events (2001–2023) that altered the expected path of U.S. defense expenditure. Second, for each event, we estimate market-implied shifts in expected defense spending with cross-sectional regressions of contractors’ stock returns on their reliance on military revenues. We show that this approach statistically validates each event, quantifies each shock in an intuitive, model-consistent fashion, and readily generalizes to other macroeconomic contexts. Employing the estimated shocks in a shift-share analysis yields a two-year MSA-level GDP multiplier of approximately 1 for U.S. military build-ups.
Dormant Projects
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Heterogeneous Effects of PIT Shocks: a Regional Approach
We construct regional income distributions using “Generalized Pareto Interpolation” and use them to build region-specific personal income tax (PIT) shocks. We examine the regional effects of the tax cuts enacted during the Bush and Trump administrations, as well as the tax increase on top-income earners during the Obama administration.