Comparative empirical analysis of temporal relationships between construction investment and economic growth in the United States

Abstract

The majority of policymakers believe that investments in construction infrastructure would boost the economy of the United States (U.S.). They also assume that construction investment in infrastructure has similar impact on the economies of different U.S. states. In contrast, there have been studies showing the negative impact of construction activities on the economy. However, there has not been any research attempt to empirically test the temporal relationships between construction investment and economic growth in the U.S. states, to determine the longitudinal impact of construction investment on the economy of each state. The objective of this study is to investigate whether Construction Value Added (CVA) is the leading (or lagging) indicator of real Gross Domestic Product (real GDP) for every individual state of the U.S. using empirical time series tests. The results of Granger causality tests showed that CVA is a leading indicator of state real GDP in 18 states and the District of Columbia; real GDP is a leading indicator of CVA in 10 states and the District of Columbia. There is a bidirectional relationship between CVA and real GDP in 5 states and the District of Columbia. In 8 states and the District of Columbia, not only do CVA and real GDP have leading/lagging relationships, but they are also cointegrated. These results highlight the important role of the construction industry in these states. The results also show that leading (or lagging) lengths vary for different states. The results of the comparative empirical analysis reject the hypothesis that CVA is a leading indicator of real GDP in the states with the highest shares of construction in the real GDP. The findings of this research contribute to the state of knowledge by quantifying the temporal relationships between construction investment and economic growth in the U.S. states. It is expected that the results help policymakers better understand the impact of construction investment on the economic growth in various U.S. states.

Driving Public Investments in Construction Sector for Economic Growth in Nigeria: A Synthesis of Wagnerian and Keynesian Hypotheses

“…The first strand deals with the relationship between construction sector and economic development [18,34,35]. The second strand deals with whether investment in construction sector drives gross domestic product (GDP) growth or vice versa [3,16]. Whereas the third strand deals with the pull and push effects of construction sector within the national economy through input-output analysis [36,37].…”

“…Empirically, scholars have expressed divergent views on whether public investments in construction sector propel economic growth or vice versa [16,20,26,[44][45][46][47], and especially in Nigeria [3,19,[48][49][50][51][52][53]. However, the perceived need of investments in construction sector is directly dependent on the state of economy and government fiscal and monetary policies [54].…”

“…However, investment attraction of construction industry development by public sector is even more strategic to all areas of the economy [2]. Both in the developed and developing economies, the proponents of Keynesian Theory believed that investments in construction sector would boost the nations' economy [3,4].…”

Evolution of GDP and its impact on the pharmaceutical sector of Ecuador (2007-2016)

“…Public investments in infrastructure affects the economic growth of a country (Bravo, 2014), positively influencing the industrialization processes (Rodríguez et al, 2016). Similarly, several studies have shown there is high correlation between investment in strategic sectors and GDP growth, as well as improvements in the general conditions of the economy (Ahmadi & Shahandashti, 2017;Galindo & Sosvilla, 2012). This would explain the evolution of the gross domestic product in the Andean country, since public spending in Ecuador exceeded in 2016 the tripled amount of the same as of 2007.…”

Post-hazard labor wage fluctuations: a comparative empirical analysis among different sub-sectors of the U.S. construction sector

“…The construction sector, as an important sector in the economy of the United States (Ahmadi and Shahandashti, 2017), plays a vital role in the recovery phase of natural hazards (Lloyd-Jones, 2006; Jayaraj, 2006; Benson et al , 2007; Owen and Dumashie, 2007; Amaratunga and Haigh, 2008; UN/ISDR, 2009; Hallegatte, 2014; Ahmadi and Shahandashti, 2018). Moreover, most indirect economic losses in the aftermath of natural hazards are construction-related losses (Hallegatte, 2014).…”