Dynamist Blog


In response to my posting of David K.'s note on trying to track down the factoid that $1 billion in highway spending generates 48,000 jobs, I received the following email, which I'm posting in the interest of fairness.

My name is Dr. Arthur Jacoby but most people call me Jake. I'm a Senior Staff Economist in the FHWA Office of Policy and lead a small research program called "Highways and the Economy". I was sent a url linking me to the article "KNOWLEDGE PRODUCTION, WASHINGTON-STYLE". In it you write, "To summarize, the whole study was bunk, engineered to arrive at a predetermined conclusion that would suggest the biggest number possible. (I suspect that's one reason that DOT doesn't make it available on their website -- they know it wouldn't withstand methodological scrunity)." [Actually, this is a quotation from David's note.--vp]

I think you and/or David K have it wrong. The JOBMOD income and employment estimation model is a much better product than you indicate. It follows a rather standard I/O [input-output] assessment methodology and has withstood considerable methodological and statistical scrutiny by CRS, OMB and others.

However, you are correct that the JOBMOD income and employment estimation model is not posted on our web site. Because of the size of the model I have been distributing it on CD. I would be happy to provide a copy to you upon request. Also, the Highway and the Economy research web page is currently undergoing reconstruction. I assure you JOBMOD documentation will appear there eventually, along with related macro-econometric studies I have initiated including works by M. Ishaq Nadiri, Barbara Fraumeni, and Clifford Winston.

I am attaching two files to introduce you to the employment research. The first is a widely distributed summary of JOBMOD results for a $1 billion federal-aid spending scenario. It was the basis for initial statements about employment impacts of Federal-aid construction spending by Secretary Mineta and Administrator Peters last summer, and is the likely source of many Congressional statements as well. The second file is the User's Manual for the model. You will notice the manual contains several caveats concerning appropriate uses of the IO methodology. Please let me know if you would like to receive the model on CD.

So neither DOT nor anyone in Congress simply made up the claim that $1 billion of spending produces 48,000 new jobs. Taxpayers paid experts to come up with the calculation.

But it still doesn't pass the smell test. Federal construction jobs pay more than $20,000 each, and this isn't the Great Depression; most people hired would be doing something else if they weren't building government roads. Keep in mind that these job projections are not based on the assumption that highway spending is investment that increases productivity. Rather, they assume that the spending is jacking up employment directly through the hiring of construction workers and indirectly through their spending. That Keynesian story only works if you assume lots of slack in the system.

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