Infrastructure Construction: Effect of Social and Environmental Regulations

A Federal Reserve Bank report suggests that infrastructure spending and productivity move in tandem. In fact, the data indicate that infrastructure spending appears to be more effective than tax cuts for stimulating the economy. The study suggests that expenditures for infrastructure systems that aid in the production and distribution of goods and services tend to have a direct impact on the profitability of industry, which in turn spurs private‐sector investment. Complicating the infrastructure problem, however, is the effect of social, environmental, and governmental regulations, such as Environmental Impact Statements (EIS), Equal Employment Opportunity (EEO), Disadvantaged Business Enterprise (DBE), and Occupational Safety and Health Administration (OSHA) rules. The approximate costs and benefits to the construction industry of these regulations are summarized in the paper. Specifically, the increase in Engineering News‐Record 400 (ENR 400) construction cost (unweighted) is estimated to vary between roughly 0.24% and 3.4% for various regulations. It is apparent, therefore, that the regulations may directly or indirectly effect the ability of communities to solve the infrastructure problem.