The impact of investment in transport infrastructure on employment: the case of Israel

Policy makers make decisions on public investments based on the contribution of investment to the economy, inter alia, the contribution of investment to employment growth. However, examination of these contributions is usually based on short-term impact, i.e. direct employment resulting from project implementation. In contrast, the long-term effects do not receive significant attention. In this article, i examine the effect of investment in transportation on both short- and long-term employment. The longterm effects of such investment are far more significant than those in the short term and therefore should be central to policy makers' considerations. The direct employment effects were examined through input-output tables, while the extensive employment effects were examined using an econometric model. The results indicate that the extensive long-term effects are 12 times greater than the direct short-term effects or more (the calculation was done for 50 years). The resulting cost-benefit ratio of the total effects was 1:6.6, indicating high profitability. The high returns received by the model are to some extent a result of Israel's relatively low capital stock of transport infrastructure.