The Corner

Stimulus Spending Explained

If you are interested in understanding how Keynesian economists (the good ones) think government spending triggers economic growth, if and when economists disagree on the issue of stimulus, and whether or not World War II stimulated the economy, you should listen to this great conversation between economists Russ Roberts and Garett Jones on EconTalk.

Jones and Roberts review the literature on stimulus spending, including the work of Christina RomerValerie Ramey, Robert Barro, and Alberto Alesina. They talk about why wages don’t fall as we would expect during recessions (more on that here). And they talk about Jones’s work with AEI’s Dan Rosthchild on the fact that stimulus money wasn’t use primarily to employ people who were unemployed.

The whole interview, with links to papers, is here. I wrote about Ramey’s most recent work here.