The direct employment impact of public investment

Abstract

We evaluate the direct employment effect of the public investment in key infrastructure ‒ electricity, roads, schools and hospitals, and water and sanitation. Using rich firm-level panel data from 41 countries over 19 years, we estimate that US$1 million of public spending on infrastructure creates 3–7 jobs in advanced economies, 10–17 jobs in emerging market economies, and 16–30 jobs in low-income developing countries. As a comparison, US$1 million in public spending on R&D yields 5–11 jobs in R&D in OECD countries. Green investment and investment with a larger R&D component deliver a higher employment effect. Overall, we estimate that 1% of global GDP in public investment can create more than seven million jobs worldwide through its direct employment effects alone.