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The demand for construction services is a classic starting point for public economic stimulus programmes, such as those recently used to mitigate the economic effects of the coronavirus pandemic. This research project examined which stabilizing effects can be expected from additional demand for construction work and what conditions their magnitude depends on.
Serious economic crises, in which overall economic production and income collapse drastically within a short period of time and unemployment increases rapidly, have the potential to seriously destabilize the economy. They necessitate a stabilising intervention of economic policy. Public economic stimulus programmes are one way of doing this. The starting point of such programmes is often the demand for construction services, because the public sector itself is a major sponsor of construction investments, and because only a small part of the funds spent flows abroad for imports, as the procurement of construction services is typically local.
This research project examined the effects that additional demand for construction services can be expected to have on overall economic production and employment, as well as on public finances. The source of increased demand was either an increase in public investment or an increase in private construction investment due to some government subsidy programme. One interesting factor was the extent of the stabilizing effect on overall economic production and employment over time and in relation to the use of public funds, taking all repercussions into consideration. Furthermore, the magnitude of which the stabilizing effect depends on the general economic conditions was investigated, with particular focus on the positioning of monetary policy and the degree of utilization of production capacities in the construction industry.
Contractors of the project were Kiel Economics Research and Forecasting GmbH & Co. KG.
Stefan Rein
Federal Institute for Research on Building, Urban Affairs and Spatial Development
Division WB 4 "Digital Transformation of the Construction Industry"
Phone: +49 228 99401-1349
Email:
stefan.rein@bbr.bund.de