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The Municipal Wage and Employment Effects of Public Infrastructure

Utah Division of Energy. University of Montana, Missoula, MT 59812, USA

Douglas R. Dalenberg

Department of Economics, University of Montana, Missoula, MT 59812, USA

We empirically examine the relationship between public capital and municipal employment levels and changes using a sample of 48 large US cities during the 1970-80 period. We find greater stocks of public capital are associated with a higher demand for and supply of municipal workers. Holding all other factors constant, the effect of a 10 per cent greater level of per capita public capital stock is a 0.6 and 12.9 per cent higher demand for and supply of municipal workers in the short run. Reduced form estimates indicate a net positive effect on municipal employment but no net effect on municipal wages. These findings are supported by a fixed-effect model estimation.

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