Role of the construction sector in the economy of a city

The need to renew civil infrastructure is particularly acute in urban centres. However, investment in infrastructure renewal has different economic implications compared with new construction, mainly having multiplier effects as opposed to real effects. Statistical techniques are used to study the factors that influence private sector commercial, industrial, and residential construction starts in the Greater Toronto Area (GTA). Regression equations for the construction sector are incorporated into a macroeconomic model of the GTA. This model is used to study the impacts of public construction spending on the GTA economy. Impacts produced by infrastructure investment are not limited to the construction industry but are seen over the whole economy. In the model simulation, a CAN$1.75 billion road investment in the second quarter of 1994 produced an additional CAN$375 million increase in regional gross domestic product (GDP).Key words: infrastructure investment, infrastructure renewal, regional economics, Greater Toronto Area.