Breaking Down the U.S. Employment Multiplier Using Micro-Level Data
We use restricted data from the Quarterly Census of Employment and Wages (QCEW) to link the universe of U.S. establishments with the universe of contractors in the Federal Procurement Data System (FPDS). Leveraging detailed institutional knowledge of federal acquisitions, we construct a new set of unanticipated contracts and examine their effects on employment growth. We find positive, significant, and persistent effects on firms with fewer than 150 employees. Using loan data from the Federal Reserve (Y14-Q), we show that small firms expand their credit and face lower interest rates after winning unanticipated contracts. At the regional level, we estimate a cost-per-job of $57,000 per year using unanticipated contracts—an order of magnitude lower than previous estimates based on all defense contracts. Lastly, by leveraging restricted QCEW data, we decompose the employment multiplier into a direct effect on contractors and an indirect multiplier effect on non-contractors, finding a 55-45% split, respectively.
- Posted on:
- August 26, 2024
- Length:
- 1 minute read, 150 words
- See Also: