Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    State and Local Government Employment in the COVID-19 Crisis
    15 Sep 2020Working Paper Summaries

    State and Local Government Employment in the COVID-19 Crisis

    by Daniel Green and Erik Loualiche
    The COVID-19 crisis has had large impacts on local economies and government budgets. Balanced budget requirements, not mis-management, have generated a fiscal crisis and forced state and local governments to reduce service provision precisely when it is in greatest demand.
    LinkedIn
    Email

    Author Abstract

    Local governments are facing large losses in revenues and increased expenditures because of the COVID-19 crisis. We document a causal relationship between fiscal pressures induced by COVID-19 and the layoffs of state and local government workers. States that depend more on sales tax as a source of revenue laid off significantly more workers than other states. The CARES Act's provision of $150 billion in aid to state and local governments reduced the fiscal pressures they faced. Exploiting a kink in the formula for allocation of funding across states, we estimate a state and local government employment multiplier for federal aid—each dollar of federal aid was used by states to support 31 cents of payrolls. State rainy day fund balances limit the sensitivity of employment to both revenue shocks, revealing that balanced budget requirements for state and local governments increase the procyclicality of public service provision.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2020
    • HBS Working Paper Number: HBS Working Paper #21-023
    • Faculty Unit(s): Finance
      Trending
        • 13 Jun 2022
        • Research & Ideas

        Extroverts, Your Colleagues Wish You Would Just Shut Up and Listen

        • 11 Apr 2014
        • Working Paper Summaries

        Learning By Thinking: How Reflection Improves Performance

        • 18 Apr 2022
        • HBS Case

        Dick’s Sporting Goods Followed Its Conscience on Guns—and It Paid Off

        • 23 Jun 2022
        • Research & Ideas

        All Those Zoom Meetings May Boost Connection and Curb Loneliness

        • 28 Jun 2022
        • Book

        The Moral Enterprise: How Two Companies Profit with Purpose

    Daniel W. Green
    Daniel W. Green
    Assistant Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • COVID-19
    • Business and Government Relations
    • Government Administration
    • United States

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College