Employment Effects of Stimulus Investments

Lukas Buchheim
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Lukas Buchheim: University of Munich

No 1455, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We estimate the causal impact of countercyclical infrastructure investments on employment and unemployment from cross-county data. To this end, we exploit a particular feature of the sizable German infrastructure investment program enacted during the Great Recession. By law, 65 % of all stimulus funds were earmarked for investment in educational infrastructure with a special focus on the renovations of existing school buildings. The scope for stimulus investment at the local level was thus to a large part predetermined by the number of schools, opening up the possibility to use schools as an instrument for local investments. Our 2SLS estimates suggest costs for one job-year between 18'500 Euro and 35'500 Euro. The first jobs were created one year after the stimulus program was enacted. These costs per job-year are similar to estimates from evaluations of the US stimulus program.

Date: 2015
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