Between 1978 and 1985, municipal governments and private industry will spend about $111 billion dollars on construction of new facilities to reduce air and water pollution as mandated by the EPA. This report presents estimates of how these projected expenditures will affect the total level of construction and how employment, wages, interest rates, and other variables will respond to the change in construction output. Effects on employment in selected sub-classes of the construction industry were also estimated. The response of the construction industry to increased spending for pollution control was estimated by use of an econometric model of the industry. The model, developed for this study, was simulated to predict the effects of projected spending through 1985. The results suggest that construction output will rise by less than the EPA mandated expenditure. The difference is due, in part, to displacement of spending that local governments would otherwise have done and, in part, to absorption of the increase by rising wages and prices in construction. There is also some displacement of industrial expenditures for pollution abatement because of the increased cost of building a new plant. The results also suggest that employment in the construction industry is increased. Employment of young, black, inexperienced workers increases more than would be expected based on their representation in the construction labor force. (Author)