THE EFFECTS OF TAXES, EXPENDITURES, AND PUBLIC INFRASTRUCTURE ON METROPOLITAN AREA EMPLOYMENT*

Abstract

ABSTRACT. Data for 28 metropolitan areas over a 15‐year period are used to determine the impacts of government spending, taxes, and public infrastructure on total employment and disaggregated employment. After carefully controlling for the government budget constraint we find that taxes are negatively related to total employment and education spending is positively related to total employment. Nevertheless, we find that it is difficult for metropolitan areas to influence the composition of their employment with government tax and expenditure policies. Moreover, at current levels of public infrastructure, marginal changes in infrastructure have no strong effect on employment.

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