The direct employment impact of public investment

Sector	Compustat (NAICS)	Orbis (CPA)
Electricity	237130 – Power and Communication Line and Related Structures Construction	F42.2.1 – Construction of utility projects for fluids F42.2.2 – Construction of utility projects for electricity and telecommunications
Roads	237310 – Highway, Street, and Bridge Construction 333120 – Construction Machinery Manufacturing (Drags, road construction and road maintenance equipment, manufacturing)	F42.1 – Construction of roads and railways, including: F42.1.1 – Construction of roads and motorways F42.1.2 – Construction of railways and underground railways F42.1.3 – Construction of bridges and tunnels
Schools and hospitals	2362 – Commercial and Institutional Building Construction	F42.9.9 – Construction of other civil engineering projects n.e.c.
Water and sanitation	237110 – Water and Sewer Line and Related Structures Construction	F42.9.1 – Construction of water projects

1 Note: NAICS is the North American Industry Classification System (cf. https://www.census.gov/eos/www/naics/) and CPA is the European Classification of Products by Activity (cf. https://ec.europa.eu/eurostat/web/cpa).

Source: Compustat and Orbis.

Table 2.

Summary statistics

Advanced economies	Countries	Obs.	Mean	Std. Dev.
Revenue	27	43,485	11.0	14.5
Employees	27	43,485	45.1	74.4
Emerging market economies	Countries	Obs.	Mean	Std. Dev.
Revenue	14	4,095	7.7	11.8
Employees	14	4,095	123.4	195.0

1 Notes: The summary statistics present revenues in millions of 2015 U.S. dollars and employment by income group. The sample data is for 1999–2017 and covers firms with at least five annual observations.

Source: Author’s calculations based on Compustat and Orbis.

Table 3.

Immediate Job Content in Selected Infrastructure Sectors

Advanced economies	(1)	(2)	(3)	(4)
Advanced economies	Pool	Panel	Without 2008–2009	Revenue increases
Electricity	4.278*** (0.238)	2.363*** (0.206)	2.390*** (0.217)	2.433*** (0.210)
Roads	3.124*** (0.114)	1.722*** (0.128)	1.742*** (0.141)	1.817*** (0.142)
Schools and hospitals	2.223*** (0.238)	0.850*** (0.125)	0.817*** (0.116)	0.824*** (0.166)
Water and sanitation	2.778*** (0.348)	1.206*** (0.235)	1.184*** (0.252)	1.153*** (0.290)
Fixed effects	Country	Firm	Firm	Firm
Clustered at	Firm	Firm	Firm	Firm
Observations	43,485	43,485	38,971	27,244
R-squared	0.637	0.201	0.198	0.203
Number of clusters	5,123	5,123	5,123	5,123
Emerging market economies	(1)	(2)	(3)	(4)
Emerging market economies	Pool	Panel	Without 2008–2009	Revenue increases
Electricity	8.120*** (1.743)	7.406** (3.175)	8.300** (3.449)	7.832** (3.740)
Roads	8.178*** (1.370)	2.287*** (0.679)	2.037*** (0.722)	1.902** (0.779)
Schools and hospitals	7.764*** (2.376)	4.578** (1.788)	4.777** (2.171)	3.898** (1.663)
Water and sanitation	12.28*** (4.318)	4.965* (2.593)	5.587* (2.973)	4.829 (4.011)
Fixed effects	Country	Firm	Firm	Firm
Clustered at	Firm	Firm	Firm	Firm
Observations	4,095	4,095	3,660	2,539
R-squared	0.563	0.157	0.168	0.161
Number of clusters	556	556	556	556

1 Notes: This table presents the results of regressions of employment on revenues in millions of 2015 U.S. dollars. Model 1 assumes that labor moves freely across companies within sectors, while Models 2–4 assume that labor stays at the firm level. For robustness, Model 3 restricts the estimations to the years 1999–2007 and 2010–2017, i.e., without the Global Financial Crisis years of 2008–2009 and Model 4 computes the impact on employment of revenue increases only. The sample data is from 1999 to 2017, and only firms with at least five annual observations were kept. Heteroskedasticity-robust standard errors clustered at the firm level are reported in parenthesis.

1 *, **, and *** denote significance at 10, 5, and 1%, respectively.

1 Source: Author’s own estimations based on Compustat and Orbis.

Job Content per US$1 Million of additional investment.
*Notes:* The figure shows the estimates of the job content of US$1 million of investment for different sectors and country groups based on regressions of employment on revenues in 1999–2017, covering 47,580 observations for 5,679 privately owned and state-owned enterprises. The stripped bar and the red rhombus represent the labor mobility range and midpoint estimate, respectively, for medium labor intensity. Labor mobility is the easiness of moving across companies within sectors (given by the point estimates in Table 3) and labor intensity is the path-through share to the supply chain in the sector (parametrized between 35% and 65%). The thick horizontal dashes and the black triangle represent the overall maximum and minimum values and the average estimates, respectively, accounting for wide ranges of labor intensity. The estimates for low-income countries are extrapolated from the other estimates.
*AE:* advanced economies; EME: emerging market economies; LIDC: low-income developing economies.
*Source:* Author’s own estimations based on Compustat and Orbis.

Table 4.

Job content by sectors and income group

Advanced economies	Labor mobility
Advanced economies	Labor intensity	High	Medium	Low
Energy	High	12.2	9.4	6.8
	Medium	8.6	6.6	4.7
	Low	6.6	5.1	3.6
Roads	High	8.9	6.9	4.9
	Medium	6.2	4.8	3.4
	Low	4.8	3.7	2.6
Schools and hospitals	High	6.4	4.3	2.4
	Medium	4.4	3.0	1.7
	Low	3.4	2.3	1.3
Water and sanitation	High	7.9	5.7	3.4
	Medium	5.6	4.0	2.4
	Low	4.3	3.1	1.9
Emerging market economies	Labor mobility
Emerging market economies	Labor intensity	High	Medium	Low
Energy	High	23.2	22.3	21.2
	Medium	16.2	15.6	14.8
	Low	12.5	12.0	11.4
Roads	High	23.4	14.9	6.5
	Medium	16.4	10.4	4.6
	Low	12.6	8.0	3.5
Schools and hospitals	High	22.2	17.7	13.1
	Medium	15.5	12.4	9.2
	Low	11.9	9.5	7.0
Water and sanitation	High	35.1	24.6	14.2
	Medium	24.6	17.2	9.9
	Low	18.9	13.2	7.6
Low-income developing countries	Labor mobility
Low-income developing countries	Labor intensity	High	Medium	Low
Energy	High	37.9	35.1	32.5
	Medium	26.6	24.6	22.7
	Low	20.4	18.9	17.5
Roads	High	31.4	22.9	14.5
	Medium	22.0	16.0	10.2
	Low	16.9	12.3	7.8
Schools and hospitals	High	35.6	31.1	26.5
	Medium	24.9	21.8	18.6
	Low	19.2	16.8	14.3
Water and sanitation	High	53.9	43.4	33.0
	Medium	37.8	30.4	23.1
	Low	29.0	23.4	17.8

1 Notes: This table presents the estimates of direct job impact per US$1 million spent in public investment by sector, income level, and labor-market characteristics. Labor mobility is the easiness of moving across companies within sectors (given by the point estimates in Table 3) and labor intensity is the path-through share to the supply chain in the sector (parametrized between 35% and 65%). The coefficients for LIDC are computed as a linear extrapolation from AE and EME. The sample data is for 1999–2017.

Source: Author’s own estimations based on Compustat and Orbis.

Table 5.

Job content in R&D by recipient type

	(1)	(2)	(3)	(4)
	Government	Higher education	Business	Non-profit
Spending in R&D (US$ million)	4.837*** (1.281)	10.99*** (3.970)	10.55** (4.609)	4.477** (2.020)
Country fixed effects	Yes	Yes	Yes	Yes
Cluster at country level	Yes	Yes	Yes	Yes
Observations	409	405	414	287
R-squared	0.690	0.425	0.635	0.331
Number of clusters	36	36	37	25

1 Notes: This table presents the results of panel regressions of employment on spending in R&D in millions of 2015 U.S. dollars in OECD countries. The models correspond to recipients of R&D financing: government, higher education, business, and private non-profit. The sample data is for 1999-2015. Heteroskedasticity-robust standard errors clustered at the country level are reported in parenthesis.

1 *, **, and *** denote significance at 10, 5, and 1%, respectively.

1 Source: Author’s calculations.

Appendix 1.

Employment and GDP in Advanced Economies (AEs) and Emerging Market Economies (EMEs) This appendix contains the list of countries (classified by level of income), the employment in millions of employees, and the GDP in billions of U.S. dollars. The sample includes firm-level data from 38 AEs and 63 EMEs, for a total of 101 economies representing 95% of the global GDP.

Country	Income level	Employment (millions)	GDP (US$ billions)
Albania	Emerging Market Economy	1.1	15.4
Algeria	Emerging Market Economy	11.1	172.8
Argentina	Emerging Market Economy	17.1	445.5
Armenia	Emerging Market Economy	1.6	13.4
Azerbaijan	Emerging Market Economy	5.0	47.2
The Bahamas	Emerging Market Economy	0.2	12.7
Bahrain	Emerging Market Economy	0.9	38.2
Barbados	Emerging Market Economy	0.1	5.2
Belarus	Emerging Market Economy	4.3	62.6
Belize	Emerging Market Economy	0.2	2.0
Bolivia	Emerging Market Economy	5.6	42.4
Bosnia and Herzegovina	Emerging Market Economy	1.0	20.1
Botswana	Emerging Market Economy	1.5	18.7
Brazil	Emerging Market Economy	92.1	1,847.0
Brunei Darussalam	Emerging Market Economy	0.2	12.5
Bulgaria	Emerging Market Economy	3.1	66.2
Cabo Verde	Emerging Market Economy	0.3	2.0
Chile	Emerging Market Economy	8.6	294.2
China	Emerging Market Economy	775.3	1,4140.2
Colombia	Emerging Market Economy	22.9	327.9
Costa Rica	Emerging Market Economy	2.3	61.0
Croatia	Emerging Market Economy	1.4	60.7
Dominican Republic	Emerging Market Economy	4.6	89.5
Ecuador	Emerging Market Economy	7.5	107.9
Egypt	Emerging Market Economy	25.9	302.3
El Salvador	Emerging Market Economy	2.8	26.9
Hungary	Emerging Market Economy	4.5	170.4
India	Emerging Market Economy	32.0	2,935.6
Indonesia	Emerging Market Economy	127.1	1,111.7
Iran	Emerging Market Economy	25.1	458.5
Jamaica	Emerging Market Economy	1.2	15.7
Jordan	Emerging Market Economy	1.8	44.2
Kazakhstan	Emerging Market Economy	8.9	170.3
Kuwait	Emerging Market Economy	2.7	137.6
Malaysia	Emerging Market Economy	15.0	365.3
Mauritius	Emerging Market Economy	0.5	14.4
Mexico	Emerging Market Economy	54.4	1,274.2
Mongolia	Emerging Market Economy	1.3	13.6
Morocco	Emerging Market Economy	11.2	119.0
North Macedonia	Emerging Market Economy	0.8	12.7
Oman	Emerging Market Economy	2.3	76.6
Pakistan	Emerging Market Economy	59.8	284.2
Panama	Emerging Market Economy	1.9	68.5
Peru	Emerging Market Economy	16.9	229.0
Philippines	Emerging Market Economy	42.1	356.8
Poland	Emerging Market Economy	16.5	565.9
Qatar	Emerging Market Economy	2.2	191.8
Romania	Emerging Market Economy	8.8	243.7
Russia	Emerging Market Economy	72.7	1,637.9
Serbia	Emerging Market Economy	2.3	51.5
Seychelles	Emerging Market Economy	0.0	1.6
South Africa	Emerging Market Economy	16.6	358.8
Suriname	Emerging Market Economy	0.1	3.8
Thailand	Emerging Market Economy	37.4	529.2
Trinidad and Tobago	Emerging Market Economy	0.6	22.6
Tunisia	Emerging Market Economy	3.5	38.7
Turkey	Emerging Market Economy	28.2	743.7
Turkmenistan	Emerging Market Economy	2.5	46.7
Ukraine	Emerging Market Economy	16.4	150.4
United Arab Emirates	Emerging Market Economy	7.7	405.8
Uruguay	Emerging Market Economy	1.7	59.9
Venezuela	Emerging Market Economy	8.4	70.1
Vietnam	Emerging Market Economy	58.3	261.6
Australia	Advanced Economy	12.9	1,376.3
Austria	Advanced Economy	4.4	447.7
Belgium	Advanced Economy	4.9	517.6
Canada	Advanced Economy	19.0	1,730.9
Cyprus	Advanced Economy	0.4	24.3
Czech Republic	Advanced Economy	5.3	247.0
Denmark	Advanced Economy	2.9	347.2
Estonia	Advanced Economy	0.7	31.0
Finland	Advanced Economy	2.6	269.7
France	Advanced Economy	25.6	2,707.1
Germany	Advanced Economy	42.0	3,863.3
Greece	Advanced Economy	3.9	214.0
Hong Kong SAR	Advanced Economy	3.9	373.0
Iceland	Advanced Economy	0.2	23.9
Ireland	Advanced Economy	2.3	384.9
Israel	Advanced Economy	4.0	387.7
Italy	Advanced Economy	23.3	1,988.6
Japan	Advanced Economy	67.4	5,154.5
Korea	Advanced Economy	26.9	1,629.5
Latvia	Advanced Economy	0.9	35.0
Lithuania	Advanced Economy	1.4	53.6
Luxembourg	Advanced Economy	0.5	69.5
Macao SAR	Advanced Economy	0.4	55.1
Malta	Advanced Economy	0.2	14.9
Netherlands	Advanced Economy	8.9	902.4
New Zealand	Advanced Economy	2.7	204.7
Norway	Advanced Economy	2.7	417.6
Portugal	Advanced Economy	5.0	236.4
Puerto Rico	Advanced Economy	1.0	99.9
Singapore	Advanced Economy	3.7	362.8
Slovak Republic	Advanced Economy	2.4	106.6
Slovenia	Advanced Economy	1.0	54.2
Spain	Advanced Economy	19.8	1,397.9
Sweden	Advanced Economy	5.1	528.9
Switzerland	Advanced Economy	5.0	715.4
Taiwan Province of China	Advanced Economy	11.5	586.1
United Kingdom	Advanced Economy	32.8	2,743.6
United States	Advanced Economy	156.9	21,439.5
Sum		2,204.4	83,218.7

1 Source: WEO and IMF.

References

Authors

Metrics

Articles in this issue

DOI: https://doi.org/10.2478/ijme-2023-0020 | Journal eISSN: 2543-5361 (formerly 2299-9701) | Journal ISSN: 2299-9701

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Language: English

Page range: 59 - 74

Submitted on: Jan 2, 2023

Accepted on: Jul 14, 2023

Published on: Mar 22, 2024

Published by: SGH Warsaw School of Economics

In partnership with: Paradigm Publishing Services

Publication frequency: 4 issues per year

Keywords:

COVID,

employment,

public investment,

stimulus

JEL:

E22,

E24,

H54

Related subjects:

Business and economics,

Business management,

Management accounting, financial controlling, cost calculation, investment

© 2024 Marian W. Moszoro, published by SGH Warsaw School of Economics
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Volume 60 (2024): Issue 1 (March 2024)

The direct employment impact of public investment

Figures & Tables

Table 1.

Table 2.

Table 3.

Figure 1.

Table 4.

Table 5.

Appendix 1.

Paradigm

My account