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Figure 3-9
Change in Nonfarm Employment
Percent of State Population, January-July 2009
1
0.5
0
-0.5
-1
-1.5
-2
-2.5
-3
0 25 50 75 100 125 150
Estimated non-cyclical Recovery Act Medicaid Payouts in 2007, per capita ($)
Note: Size of circle is proportional to 2008 state population.
Source: Centers for Medicare and Medicaid Services, Data Compendium; Bureau of Labor Statistics,
Current Employment Statistics; CEA Calculations.
the relative severity of the recession at the state level was unrelated to its
previous level of per-capita Medicaid spending, this portion of funds might
be thought of “as if” randomly assigned. In other words, the spending
was effectively independent of the strength or weakness of the state-level
economy once the recession hit. As Figure 3-9 shows, states that received
more funds stemming from this non-cyclical part of the formula tended to
exhibit greater employment gains through the first half of 2009 compared
with states receiving less funds.
Refining this approach, Chodorow-Reich et al. (2012) found that
each additional $100,000 of formula-based Medicaid grants generated an
additional 3.8 job-years, which translates into a $26,000 cost per job. Other
academic papers following a similar approach, but assessing broader measures
of Recovery Act spending, reached similar conclusions. For example,
Wilson (2012) estimates a cost per job of about $125,000 for all Recovery
Act spending programs other than those implemented by the Department of
Labor (mostly unemployment insurance). Feyrer and Sacerdote (2011) and
Conley and Dupor (2013) also find positive effects of the Act on employment,
although the ranges of effects estimated in both papers include magnitudes
similar to those discussed above as well as somewhat smaller effects.
The Economic Impact of the American Recovery and Reinvestment Act Five Years Later | 113