How did federal aid to states and localities affect testing and vaccine delivery?

•Federal aid to subnational governments had a modest impact on COVID vaccination rates.•Federal aid may have increased the equitability of COVID vaccination rates.•Federal aid had a substantial impact on the volume of COVID tests administered.•This is desirable as testing comes with substantial positive externalities. We estimate whether large allocations of federal aid for state and local governments played a role in advancing population testing for COVID-19 and the administration of vaccines. To overcome biases that can result from the endogeneity of federal aid allocations, we use an instrumental-variables estimator reliant on the substantial variation in federal aid predicted by variation in states’ congressional representation. We find that federal fiscal assistance dollars had a modest if any impact on the pace of vaccine rollouts, may have improved the equitability of vaccine administration, and had a substantial impact on the volume of tests administered. We observe that the difference in our findings for testing relative to vaccination suggests that surplus funds were more effective at increasing demand for services that exhibit relatively elastic demand, which is socially desirable when those services are associated with substantial public health externalities.