Equitable Growth invests in new research to better understand the effects of the fiscal response to the COVID-19 recession

The Washington Center for Equitable Growth today announced a new cohort of grantees in response to a Request for Proposals on the effectiveness of the fiscal response to the COVID-19 recession. These research projects are specifically analyzing whether policies worked to generate better macroeconomic outcomes and better and more equitable outcomes for working-age individuals in the United States.

This Request for Proposals was open to researchers at U.S. universities studying economic policy interventions that primarily took place between March 2020 and March 2021, such as those in the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, as well as the American Rescue Plan Act.

“The fiscal response to the COVID-19 recession included bold, new, experimental policies, many of which are the subject of a lot of debate,” said Janelle Jones, Equitable Growth’s vice president of policy and advocacy. “These research projects will help evaluate those policies and their impact. They will ensure we have the empirical evidence needed to inform policymaking moving forward so that responses to future recessions are grounded in data and research.”

The goal of this grantmaking is to provide policymakers with a better understanding of how specific economic policies affected the U.S. economy and workers amid the worst phases of the pandemic recession. Outcomes of particular interest are labor force participation, wages, job matches and job quality, small business reopenings, and firms’ survival and productivity.

Below, we detail the six projects that will receive funding:

• Harvard University’s Gabriel Chodorow-Reich and Johns Hopkins University’s Adam Isen will examine the short- and medium-term outcomes for U.S. firms and workers of receiving cash grants during the economic downturn. Using data from Minnesota, which gave out $125 million in grants via random lottery to small businesses during the pandemic, the authors will review the effects on these firms’ payrolls and employment levels, borrowing and delinquency, and their workers’ attachment to their employers.
• University of Maryland’s Brandon Enriquez will study the labor market effects of temporary wage subsidies. Specifically, he will look at the effect of the Employee Retention Tax Credit, a federal program implemented during the COVID-19 recession to incentivize employers to furlough rather than lay off workers to maintain employer-employee attachment. Enriquez will look at how this tax credit affected employment levels, payrolls, and small business reopenings.
• Till Von Wachter of the University of California, Los Angeles will determine the effectiveness of Short-Time Compensation, an ongoing Unemployment Insurance program that enables employers to reduce hours for a group of workers who receive prorated UI benefits and maintain job benefits. Despite garnering bipartisan support and substantial federal subsidies to states during the pandemic, Short-Time Compensation is underutilized in the United States. Von Wachter will review STC awareness and use, as well as worker and firm outcomes, and will run a random control trial to inform how to increase take-up in future downturns.
• Matthew Denes of Carnegie Mellon University, Spyridon Lagaras of the University of Pittsburgh, and Margarita Tsoutsoura at Washington University in St. Louis will study the economic impact payments in the CARES Act. The authors plan to examine the labor market effects of these stimulus payments, including salaried employment, contract jobs, unemployment, and entrepreneurship.
• University of Chicago Harris School of Public Policy’s Yana Gallen and Dmitri Koustas will study the child care spending provisions included in the American Rescue Plan and how they affected women’s labor supply and child care utilization. Specifically, they plan to look at how the expanded Child and Dependent Care Tax Credit affected household choices and socioeconomic disparities in impacts.
• Amy Claessens, Katherine Magnuson, and Alejandra Pilarz, all at the University of Wisconsin, will explore policy options for supporting the child care sector by looking at an intervention in Wisconsin during the pandemic. In 2022, the state of Wisconsin and the city of Milwaukee both substantially expanded programs that dramatically increased stipends available to eligible caregivers. The authors plan to study whether these wage supplements reduced turnover and kept care workers in their jobs, stabilizing the child care industry.

Equitable Growth tapped into the expertise of its vast academic network and various policymaker connections to create an advisory committee to guide funding decisions. The committee included Alan Blinder, an Equitable Growth Steering Committee member and Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton University; Karen Dynan, an Equitable Growth Steering Committee member and economics professor at Harvard University; Sameera Fazili, an Equitable Growth Board of Directors member and former deputy director of the National Economic Council; Michael Linden, an Equitable Growth Senior Policy Fellow and former executive associate director of the White House Office of Management and Budget; and Shilpa Phadke, former deputy director of the Gender Policy Council at the White House.

We thank the members of our advisory committee for their time and input, as well as all the applicants who submitted proposals in this extremely competitive process. We look forward to working with this new class of grantees and passing on the findings of their studies to policymakers looking for guidance on the best fiscal policies to boost worker and firm outcomes amid future economic downturns.

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