Capital investment and employment in the information sector

Estimation of the employment effects of changes in capital investment is a standard tool in public policy debates. Typically, such predictions are based on employment multipliers derived from Input-Output analysis. In this paper, we measure the employment effects of changes in capital investment in the U.S. information sector by econometrically estimating an "employment multiplier" from historical data. The estimated multiplier is 10 information sector jobs for each million dollars in expenditure, and perhaps 24 new jobs per million dollars invested across the entire economy. Employment multipliers derived from the Input-Output methodology average about 16 jobs per million, but the multiplier includes jobs outside the information sector. Including employment spillovers, our estimates suggest the multipliers from Input-Output models are plausible. We also note that information sector jobs have substantially higher median earnings than the private sector average, so the economic significance of changes in information sector employment are greater than might first appear. Our findings may be useful in debates over changes in industry regulation that could affect investment. (C) 2013 Elsevier Ltd. All rights