| dc.description.abstract | The American Recovery and Reinvestment Act of 2009 was an attempt to “jump-start
the economy to create and save jobs” by inducing state spending on an enormous
scale. 787 billion US dollars were allocated to the act, which included tax cuts and
extension of benefits under Medicaid, but also major investment programs. Under the
recovery act, 28 government agencies were each allocated a portion of the available
funds, and then decided how to spend the money. Most of the money was awarded as
grants, loans or contracts to state governments, which then distributed it further to
specific projects.
However, while the recovery act may have avoided an even deeper recession, it has
largely failed to jump-start the American economy in the intended way. Could it be
that the stimulus had less effect than it could have had, because of corruption?
Research shows that corruption increases costs of public investment, and reduces the
efficiency of public spending. In this paper, I attempt to gauge the effects of
corruption on the stimulus package by comparing projects awarded grants in the 50
US states, using a two-level modeling strategy. First, for each state, the cost of a
project is modelled as a function of the number of people employed in the project,
which yields a job cost coefficient. The assumption is that a lower coefficient implies
more efficient spending, since projects with the same amount of labor cost more when
the coefficient is higher.
Second, the job cost coefficient is modelled as a function of corruption in the state,
controlling for other state-level factors. Corruption is measured as the number of convictions for corruption in the state 1976-2009 (Glaeser & Saks 2006). The
empirical analysis shows that the job cost coefficient is higher in states where more public officials have been convicted for corruption, implying that corruption may have impaired the possible effect of the stimulus package. | sv |
