Tuesday, July 7, 2009

Stimulus spending in France

Yesterday the Times reported on stimulus spending in France, said to be $37 billion in total, three quarters to be spent this year, mostly on shovel-ready construction projects. Reading the article, it sounds like they're exclusively investing in historical structures that produce income flows from tourism.

French GDP is perhaps $2 trillion per year, so two thirds of a $37 billion stimulus would be about 1.4% of GDP. This compares with $787 billion spread over several years in a U.S. economy of $14 trillion. This article and other reports have discussed the slower rate of stimulus spending in the U.S. Assuming the $787 is spread equally in thirds across 2009-2011, it would represent about 1.8% of GDP each year.

These are relatively large numbers, and they assume the multiplier is one. That's probably a reasonable number, although Robert Barro thinks it's maybe even a little too high.