TY - JOUR
T1 - The Employment Impact of a Green Fiscal Push
T2 - Evidence from the American Recovery and Reinvestment Act
AU - Popp, David
AU - Marin, Giovanni
AU - Vona, Francesco
AU - Chen, Ziqiao
N1 - Funding Information:
ACKNOWLEDGMENTS This project has been supported in part through the Smart Prosperity Institute Research Network and its Greening Growth Partnership, which is supported by a Social Sciences and Humanities Research Council of Canada Partnership Grant (no. 895-2017-1018), as well as by Environment and Climate Change Canada’s Economics and Environmental Policy Research Network (EEPRN). This work was also supported by Horizon 2020 Framework Programme, project INNOPATHS (grant no. 730403). We thank Joe Aldy, James Stock, Gabriel Chodorow-Reich, Valerie Ramey, Carolyn Fischer, Michelle Li, and Michael Chen for useful suggestions and discussions, especially on green ARRA data. For helpful comments, we thank seminar participants at Harvard University, Duke Kunshan University, the London School of Economics, University of Bremen, SPRU at University of Sussex, University of Newcastle, APPAM, CMCC Ca’ Foscari, CESifo, the ETH workshop Energy, Innovation and Growth: Theory and Empirics, the Coalition of Finance Ministers for Climate Action workshop on The Political Economy of Carbon Pricing Post Covid-19, the workshop Where and How to Invest the EU Recovery Funds? at Universidad Pontificia Comillas of Madrid, the Resources for the Future workshop Evaluating Climate-Oriented Economic Recovery Programs, and the Greening Growth Partnership and Economics and Environmental Policy Research Network Annual Symposium.
Funding Information:
Conflict of Interest Disclosure: This project was supported in part through the Smart Prosperity Institute Research Network and its Greening Growth Partnership, which is supported by a Social Sciences and Humanities Research Council of Canada Partnership Grant (no. 895-2017-1018), as well as by Environment and Climate Change Canada’s Economics and Environmental Policy Research Network (EEPRN). Other than the aforementioned, the authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. They are currently not an officer, director, or board member of any organization with an interest in this article.
Funding Information:
A second key finding is that, whether due to administrative delays, skill gaps, or the time needed to build new green infrastructure, ARRA’s green investments created jobs more slowly than other ARRA investments. Administrative delays such as buy American guidelines, determining prevailing wages to comply with the Davis-Bacon Act, and complying with local regulations may have slowed the initial impact of spending. For instance, less than one-half of DOE funds allocated had been spent by 2011 (Carley, Nicholson-Crotty, and Fisher 2015; Carley 2016). However, administrative delays seem unlikely to explain the permanence of green jobs created by ARRA. Another potential explanation is that federal investments attracted additional private investments in green sectors (Mundaca and Richter 2015) and generally crowded-in state spending (Leduc and Wilson 2017). Many ARRA programs required matching funds from the private sector, and this was particularly true of DOE projects (Council of Economic Advisers 2010). Transforming to a greener economy was expected to support long-term economic growth (Aldy 2013).34 Our results on the mediating effect of green skills suggest another possibility, as the importance of skills suggests matching funding to skills may affect the time profile of the green ARRA effect.
Funding Information:
State and tribal assistance grants Defense environmental cleanup Electricity delivery and energy reliability Fossil Energy Research and Development eW stern Area Power Administration Borrowing Authority Bonneville Power Administration fund iT tle 17 Incentives for Innovative eT chnologies loan guarantee Science Hazardous Substances Superfund Non-defense environmental cleanup Energy rT ansformation Acceleration Fund Uranium Enrichment Decontamination and Decommissioning Fund Leaking Underground Storage aT nk rT ust Fund Environmental Program and Management Advanced eT chnology eV hicles Manufacturing Loan Program Construction, rehabilitation, operation, and maintenance, eW stern Area Power Administration
Publisher Copyright:
© 2021, Brookings Institution Press. All rights reserved.
PY - 2021/9/1
Y1 - 2021/9/1
N2 - Investments in the green economy are used for both environmental goals and fiscal stimulus. The success of these investments depends, at least in part, on whether they create new jobs and whether such jobs are available to workers hurt by a green transition. We evaluate the employment effect of green investments from the American Recovery and Reinvestment Act (ARRA). Most job creation from green ARRA investments is permanent and emerged in the post-ARRA period, but the plausible range of estimates is extremely wide (zero to twenty-five jobs per $1 million). Such large uncertainty on aggregate effects masks substantial heterogeneity across communities. The green stimulus mostly benefited areas with a greater prevalence of preexisting green skills that created 40 percent additional jobs than average communities. New jobs are primarily manual labor and in occupations performing green tasks, especially in renewable energy. However, manual labor wages do not increase. Descriptive evidence suggests that the skill gap between green energy and fossil fuel workers is modest, but green jobs require significantly more training. Because the spatial distribution of skills and jobs matters, using green stimuli can help reshape the economy in the long run but may also exacerbate regional inequities associated with the green energy transition.
AB - Investments in the green economy are used for both environmental goals and fiscal stimulus. The success of these investments depends, at least in part, on whether they create new jobs and whether such jobs are available to workers hurt by a green transition. We evaluate the employment effect of green investments from the American Recovery and Reinvestment Act (ARRA). Most job creation from green ARRA investments is permanent and emerged in the post-ARRA period, but the plausible range of estimates is extremely wide (zero to twenty-five jobs per $1 million). Such large uncertainty on aggregate effects masks substantial heterogeneity across communities. The green stimulus mostly benefited areas with a greater prevalence of preexisting green skills that created 40 percent additional jobs than average communities. New jobs are primarily manual labor and in occupations performing green tasks, especially in renewable energy. However, manual labor wages do not increase. Descriptive evidence suggests that the skill gap between green energy and fossil fuel workers is modest, but green jobs require significantly more training. Because the spatial distribution of skills and jobs matters, using green stimuli can help reshape the economy in the long run but may also exacerbate regional inequities associated with the green energy transition.
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U2 - 10.1353/eca.2022.0000
DO - 10.1353/eca.2022.0000
M3 - Article
AN - SCOPUS:85132908554
SN - 0007-2303
VL - 2021-Fall
SP - 1
EP - 69
JO - Brookings Papers on Economic Activity
JF - Brookings Papers on Economic Activity
ER -