Working Paper States Federal Funding for Research and Development has Benefits at the Local Level

Aug 10, 2018

A new working paper from researchers at the University of Michigan suggests that federal research and development (R&D) funds provided through the 2009 American Recovery and Reinvestment Act (ARRA) have had a significant impact on economic development at the local level. The paper, titled “Local Fiscal Multiplier on R&D and Science Spending: Evidence from the American Recovery and Reinvestment Act” explains that ARRA funding had a greater impact on the economy at the local county level, with “larger than comparable results for federal stimulus in general as well as federal stimulus on health or infrastructure.”

ARRA was signed into law in 2009. It was developed to help end the recession by spurring customer spending and saving jobs from being cut.  It granted approximately $7.6 billion in funding towards scientific research to agencies such as the National Science Foundation, the Department of Energy and the National Institute of Standards and Technology.

The working paper looked at the changes in employment through ARRA at the local level, to examine what effects this increased federal spending on R&D had. They found that for every one million dollars spent on research between 2009 and 2013, 27 jobs were added with an estimated job-year cost of approximately $15,000. The paper does make a point of noting that federal R&D funds tended to be awarded to counties that were more educated than other types of funding.

To view the working paper in full, click here: