Putting America to Work, Where? The Limits of Infrastructure Construction as a Locally-Targeted Employment Policy.

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Abstract:

Is infrastructure construction an effective way to boost employment in distressed local labor markets? I use new geographically detailed data on highway construction funded by the American Recovery and Reinvestment Act to study the relationship between construction work and local employment growth. I show that the method for allocating funds across space facilitates a plausible selection-on-observables strategy. However, I find a precisely estimated zero effect of spending on road construction employmentor other employmentin the locale of the construction site. Reported data on vendors reveal this is because the majority of contractorsselected by competitive biddingcommute from other local labor markets. I also find no robust effect in the locales of the contractors’ offices, but argue that this source of variation does not capture an economically meaningful local demand shock. I conclude that infrastructure construction is not effective as a way to stimulate local labor markets in the short run so long as projects are allocated by competitive bidding.

Full Text

Revise and Resubmit, Journal of Urban Economics
Last updated on 10/31/2017