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An Empirical Estimate of the Labor Response Function for Benefit-Cost Analysis

Published online by Cambridge University Press:  19 January 2015

Donald F. Vitaliano
Donald F. Vitaliano*
Affiliation:
Rensselaer Polytechnic Institute
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Abstract

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Since the seminal contribution of Haveman and Krutilla(1968), the subject of the potential drawdown from the pool of unemployed versus diversion of labor from existing employments consequent upon a public investment project has been largely neglected in the BCA literature. The advent of a new BLS series on job vacancies now permits direct estimation of the crucial unemployment-vacancies (U-V) relationship, as compared to the ad hoc sine function using the unemployment rate assumed by Haveman and Krutilla. The probability p of a worker being drawn from the pool of unemployed is recast as a function of the job vacancy rate (vacancies/labor force) and shows higher values than Haveman and Krutilla at comparable rates of unemployment. At the height of the 2008-09 Great Recession, about half of Stimulus induced jobs were drawn from the pool of unemployed.

Keywords

job creationjobvacancies and unemployment
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 3 , Issue 3 , 23 August 2012 , pp. 1 - 12
Copyright
Copyright © Society for Benefit-Cost Analysis 2012

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