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  4. February 2023
  5. The Employment Effects of Countercyclical Public Investments

The Employment Effects of Countercyclical Public Investments

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Abstract

This paper estimates the causal impact of a sizable German public investment program on employment at the county level. The program focused on improving the energy efficiency of school buildings, making it possible to use the number of schools as an instrument for investments. It also enforced tight deadlines, reducing potential implementation lags. The program was cost-effective, creating, on average, one job for one year for an investment of €24,000. The employment gains are detectable after nine months and are accompanied by an unemployment reduction amounting to half of the job creation. Employment grew predominately in the directly affected industries.

Citation

Buchheim, Lukas, and Martin Watzinger. 2023. "The Employment Effects of Countercyclical Public Investments." American Economic Journal: Economic Policy, 15 (1): 154-73. DOI: 10.1257/pol.20180323

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E32 Business Fluctuations; Cycles
  • E62 Fiscal Policy
  • H54 National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
  • J23 Labor Demand
  • R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
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