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Including Jobs in Benefit-Cost Analysis

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Abstract

Public policies may affect employment by directly creating jobs, facilitating job creation, or augmenting labor supply. In labor markets with high unemployment, such employment changes may have significant net efficiency benefits, which should be included in benefit-cost analyses. The research literature offers diverse recommendations on measuring employment benefits. Many of the recommendations rely on arbitrary assumptions. The resulting employment benefit estimates vary widely. This paper reviews this literature, and offers recommendations on how to better measure employment benefits using estimable parameters. Guidance is provided on measuring policy-induced labor demand, estimating the demand shock’s impact on labor market outcomes, and translating labor market impacts into efficiency benefits. Two measures are proposed for efficiency benefits, one relying on adjusted reservation wage gains, the other on adjusted earnings gains.

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  • Timothy J. Bartik, 2011. "Including Jobs in Benefit-Cost Analysis," Upjohn Working Papers 11-178, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:11-178
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    Cited by:

    1. Carolyn Fischer & Garth Heutel, 2013. "Environmental Macroeconomics: Environmental Policy, Business Cycles, and Directed Technical Change," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 197-210, June.
    2. Scott Farrow, 2014. "Residual Risk Accounting: A Pilot Study of the Coastal Sector," UMBC Economics Department Working Papers 14-01, UMBC Department of Economics.
    3. Hanson, Torbjørn & Lindgren, Petter Y., 2019. "No country for old men? Increasing the retirement age in the Armed Forces," MPRA Paper 95917, University Library of Munich, Germany.
    4. Timothy J. Bartik, 2020. "Using Place-Based Jobs Policies to Help Distressed Communities," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 99-127, Summer.
    5. Lindgren, Petter Y. & Presterud, Ane Ofstad, 2021. "Expanding the Norwegian Armed Forces in the Time of Corona: Benefit-Cost Analysis in the Context of High Unemployment Rate," MPRA Paper 106405, University Library of Munich, Germany.
    6. Dell’Anna, Federico, 2021. "Green jobs and energy efficiency as strategies for economic growth and the reduction of environmental impacts," Energy Policy, Elsevier, vol. 149(C).
    7. Onil Banerjee & Martin Cicowiez & Adela Moreda, 2017. "Reconciliation Once and For All: Economic Impact Evaluation and Social Cost Benefit Analysis," CEDLAS, Working Papers 0207, CEDLAS, Universidad Nacional de La Plata.
    8. Alexandre Mas & Amanda Pallais, 2019. "Labor Supply and the Value of Non-work Time: Experimental Estimates from the Field," American Economic Review: Insights, American Economic Association, vol. 1(1), pages 111-126, June.
    9. Briones, M.R., 2018. "IFAD RESEARCH SERIES 20 - Transformation and diversification of the rural economy in Asia," IFAD Research Series 280069, International Fund for Agricultural Development (IFAD).
    10. Borrego-Marín, María M. & Berbel, J., 2019. "Cost-benefit analysis of irrigation modernization in Guadalquivir River Basin," Agricultural Water Management, Elsevier, vol. 212(C), pages 416-423.
    11. David Hensher & Richard Ellison & Corinne Mulley, 2014. "Assessing the employment agglomeration and social accessibility impacts of high speed rail in Eastern Australia," Transportation, Springer, vol. 41(3), pages 463-493, May.
    12. Dimitra Papadopoulou & Christos Tourkolias & Sevastianos Mirasgedis, 2015. "Assessing the macroeconomic effect of gas pipeline projects: the case of Trans-Adriatic Pipeline on Greece," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 100-118, july-Dece.
    13. Scott Farrow, 2016. "Residual Risk Accounting: A Pilot Study," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(4), pages 775-784, December.

    More about this item

    Keywords

    Reservation wages; unemployment; occupational upgrading;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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