Including Jobs in Benefit-Cost Analysis

Annual Review of Resource Economics, Forthcoming

Upjohn Institute Working Paper No. 11-178

34 Pages Posted: 30 Nov 2011

See all articles by Timothy Bartik

Timothy Bartik

W.E. Upjohn Institute for Employment Research

Date Written: November 30, 2011

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.

Keywords: Reservation wages, unemployment, occupational upgrading

JEL Classification: H043, J068, Q028

Suggested Citation

Bartik, Timothy, Including Jobs in Benefit-Cost Analysis (November 30, 2011). Annual Review of Resource Economics, Forthcoming, Upjohn Institute Working Paper No. 11-178, Available at SSRN: https://ssrn.com/abstract=1966496 or http://dx.doi.org/10.2139/ssrn.1966496

Timothy Bartik (Contact Author)

W.E. Upjohn Institute for Employment Research ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

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