The Economics of the Construction Industry

The Economics of the Construction Industry

The Economics of the Construction Industry

The Economics of the Construction Industry


The American construction industry, reponsible for nearly 4% of the nation's Gross Domestic Product, directly employs over five million people and provides millions of additional support jobs in related fields. This book provides an introductory overview of the economic aspects of the industry, including the historical development of building activity from earliest times to modern day market-based construction, including the work of individual artisans to complex construction unions. The book explores current trends in labor force participation; the measurement of industry performance; the determinants of investment; government involvement; competition; wage determination; training; and worker safety.


The American construction industry is a vibrant and dynamic segment of the overall economy. It is annually responsible for nearly 4 percent of the nation's gross domestic product (GDP). In 1996 construction provided jobs for more than 5 million people and nearly 1.5 million support jobs in related fields. Despite this key role in the overall economy, there have been few major economic works that have focused on this important domestic industry. Construction economics remains relegated to engineering and estimating, while labor relations are often seen as an offshoot of the industrial collective bargaining experience.

Seminal works, such as those about the Chicago building trades by Stephen Sobotka (1953) or Lawrence Kahn's comparative study of the San Francisco and Los Angeles building industries (1978), focused on localized markets. Path-breaking texts, such as William Haber and Harold Levinson's (1956), were narrowly defined toward union market mechanisms. More recent books by Daniel Q. Mills (1972b) and Peter Cassimatis (1969) and studies by Steven Allen (1985, 1986, 1994) have substantially contributed to a greater appreciation of the economic impact of this industrial sector.

Mills Industrial Relations and Manpower in Construction carefully developed an analysis of the many economic characteristics within the construction markets. While such a work enhances our overall understanding of the construction market, the topics and issues sorely need to be updated. Cassimatis's brief but enlightening research project confronts much of what historically mystifies analysts of the building industry. Size and output seem to have a cloudy statistical relationship, while the small-firm nature of a large portion of the industry defies the trends that typically appear within other industrial sectors.

Why is research and development so lacking in the hands-on segment of construction? What role do unions play in retarding or . . .

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