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Shovel Ready Projects and Commercial Construction Activity’s Long and Variable Lags

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Abstract

We use microdata on the phases of commercial construction projects to document three facts regarding the sector's time-to-plan lags: (1) plan times are long and highly variable, (2) nearly half of projects in planning are abandoned, and (3) property price appreciation reduces the likelihood of abandonment. We write down a tractable model of endogenous planning starts and abandonment that can match these facts. The model also has the testable implication that supply is more elastic when there are more "shovel ready" projects ready for construction. We use local projections to validate this prediction in the cross-section for US cities.

Suggested Citation

  • David P. Glancy & Robert J. Kurtzman & Lara Loewenstein, 2024. "Shovel Ready Projects and Commercial Construction Activity’s Long and Variable Lags," Finance and Economics Discussion Series 2024-016r1, Board of Governors of the Federal Reserve System (U.S.), revised 25 Jun 2025.
    • Handle: RePEc:fip:fedgfe:2024-16
    DOI: 10.17016/FEDS.2024.016r1
    Note: Revision
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    References listed on IDEAS

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    1. Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
    2. Mark Gertler & Peter Karadi, 2013. "QE 1 vs. 2 vs. 3. . . : A Framework for Analyzing Large-Scale Asset Purchases as a Monetary Policy Tool," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 5-53, January.
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    Keywords

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    JEL classification:

    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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