Fiscal shocks and non-profit employment

Abstract

ABSTRACT This paper uses novel data from the Quarterly Census of Employment and Wages (QCEW) to identify the impact of countercyclical fiscal policy on non-profit wages, employment, and entry in the non-profit sector. The paper extends an existing empirical literature that uses the ‘Great Recession’ (2007–2009) as a shock to identify the responsiveness of non-profit labour markets to aggressive fiscal policy. The paper adopts an identification strategy which exploits variation in the Federal Medical Assistance Percentage (FMAP) reimbursement rates across states in the context of the American Recovery and Reinvestment Act (ARRA) of 2009. An instrument is applied in the place of ARRA expenditures to avoid estimation bias. I find that non-profit employment and wages are less responsive to fiscal stimulus, relative to previous point estimates for all United States firms. Point estimates indicate estimated cost of $104,000 per non-profit job saved. However, there is wide variation across non-profit sub-sectors.