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The effects of a natural gas boom on employment and income in Colorado, Texas, and Wyoming

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Abstract

Improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits, which are spread throughout the U.S., mostly in rural areas. Proponents of gas drilling point to the activity's local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains. I estimate these gains for counties in Colorado, Texas, and Wyoming, three states where natural gas production expanded substantially since the late 1990s. I find that a large increase in the value of gas production caused modest increases in employment, wage and salary income, and median household income. The results suggest that each million dollars in gas production created 2.35 jobs in the county of production, which led to an annualized increase in employment that was 1.5% of the pre-boom level for the average gas boom county. Comparisons show that ex-ante estimates of the number of jobs created by developing the Fayetteville and Marcellus shale gas formations may have been too large.

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... Moreover, this is done at the country level -an important departure from previous studies e.g. Fleming & Measham (2014; Moritz, Ejdemo, Söderholm, & Wårell, (2017);Weber, (2012Weber, ( , 2014 which provide valuable insights into these issues from a strictly regional perspective. However, there are some limitations when analyses are done at this level. ...
... However, some consider that these projections are less reliable due to a number of assumptions that are necessary in input-output modeling, such as the unconstrained supply of labor and inputs -arguably an implausible scenario in most regions where extractive activities take place (let alone in a developing country). Weber (2012), for instance, points out that compared to ex-post econometric-based approaches, input-output projections in some regions in the US were upward biased. More importantly, input-output methods do not allow us to observe the crowd-out effects as contended by the Dutch disease. ...
... Marchand (2012) analyzed mining operations in Western Canada during 1971-2006 and found that for every ten mining jobs created during boom periods, approximately three construction jobs, two retail jobs, and four and a half service jobs are created. Weber (2012Weber ( , 2014 studied the effects of the greater natural gas production in the US in the 2000s concluding that gas production did little to crowd out manufacturing employment and that each mining-related job created more than one non-mining job. Another study in the Appalachia region of the US reached 69 This figure is, however, based on South Australian mining operations (Eftimie et al., 2009). ...
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Thesis
The exploitation of extractive resources (i.e., mining and energy commodities) has been historically considered a curse for development due to the enclave nature of mining operations and the macroeconomic imbalances associated with the Dutch disease, among other reasons. The extractive commodities boom in the early 21st century, however, brought a renewed enthusiasm for this sector. Motivated by a number of study cases, several scholars suggested that the extractive sector could be used as a platform for structural transformation – given the new opportunities that emerge due to changes in the technological paradigm and the value chain structure. This dissertation thus explores whether extractive sectors can be drivers of structural transformation, or on the contrary, lead to unsustainable development paths, based on their macro-level performance in recent decades. This dissertation studies various aspects concerning structural transformation, such as production linkages (i.e., backward and forward), employment, diversification, and long-term economic growth linked to natural resources, i.e., extractive sectors in a cross-country setting. It explores, on the one hand, whether the long-established theorized mechanisms associated with the resource curse still hold, namely, those linked to the productive structure, i.e., Dutch disease and the enclave nature of extractive sectors. On the other, it also tests if the positive scenario linked to natural resources that emerged shortly after the onset of the 21st century is empirically substantiated, particularly amidst a scenario in which extractive commodity prices have been and are expected to remain high. This dissertation concludes that some of the mechanisms hypothesized by the Dutch disease, such as the contraction of employment in manufacturing, are no longer systematically observed. However, the expansion of commodity prices has had significant negative effects on the development of production linkages and diversification efforts, affecting the development of productive capacities in both the short and long term.
... For drilling, both unskilled or semi-skilled and skilled positions are required. In addition, drilling activity does create "secondary" workforce demands in the local economy [39,[51][52][53]. ...
... Several reports estimated large positive employment effects of fracking in impacted states, as reviewed by Kinnaman [35]. Peer reviewed studies using statistical approaches generally find negligible to moderate effects in local economies [38,53]. Overall, the weight of the evidence supports this claimed advantage of fracking. ...
... Fracking may generate more income by a combination of greater demand for labor and an increase in the number of jobs or rent or royalty payments to private and public resource owners [55]. Although the long run effects of fracking on income and distribution of income are not clear [55,56], positive short-term effects on income levels have been reported in case studies [38,53,57]. ...
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Article
This paper examines whether public perceptions of the claimed advantages and disadvantages of fracking are consistent with an evidence-based assessment of the claimed advantages and disadvantages. Public assessments are obtained from an internet-based opinion survey in 2014 in six states: California, Illinois, New York, Ohio, Pennsylvania, and Texas. The survey presented eleven advantages and eleven disadvantages of fracking derived from local media stories, from advocacy claims made by pro- or anti-fracking groups, and from think tank pieces. Then the respondents were asked to indicate their feelings about how important each claimed advantage and disadvantage was to their support of/opposition to fracking. Scientific assessments regarding the same claims are compiled from available peer-reviewed literature and evidence-based reviews. We classify each claim as either (a) supported by the weight of the available evidence, (b) not supported by the weight of the available evidence, or (c) there is inadequate evidence to assess it. We find less consistency with respect to the disadvantages than advantages. Respondents perceive four disadvantages out of eleven as extremely important while there is inadequate evidence to assess them or the available evidence does not support them. Our comparison has interesting implications for understanding the controversy about fracking.
... When it comes to resource extraction, however, it cannot be ignored that development of non-renewable energy can create financial benefits in local economy. Recently, case studies in the U.S. provide empirical evidence that oil and gas development have positive regional economic effects in employment, wages, and poverty rates (Bhattacharya et al., 2015;Munasib and Rickman, 2015;Weber, 2012;Wrenn et al., 2015;Agerton et al., 2017). Additionally, resource owners have opportunities to earn additional revenues created by a given parcel through larger endowments of oil and gas, which called Ricardian rents (Brown et al., 2016). ...
... Additionally, resource owners have opportunities to earn additional revenues created by a given parcel through larger endowments of oil and gas, which called Ricardian rents (Brown et al., 2016). Overall, growing non-renewable extractive sector has not only its largest economic effects on employment and wages but economic stimulus effects through rents paid to public and private entities (Weber, 2012). Table 1 describes the most recent evidence on the energy-economic growth nexus which employed panel data techniques. ...
Article
This paper examines the effects of electricity generation from both types of energy sources on sustainable state economic growth. For the analysis, this paper uses the panel data set for 47 U.S. states from 1999 to 2017 by employing the two-step Generalized Methods of Moments model. The results show that renewable energy generation has a positive impact on state economic growth whereas non-renewable energy generation may hampers economic growth. This supports that development of renewable energy resources helps not only reducing average costs to generate electricity but improving environmental quality as zero emission resources, which enhances productivity. Even though non-renewable energy can create economic benefits as a main factor of production, burning fossil fuels generates air pollution, which directly threatened labor and capital productivities. In other words, non-renewable energy generation does not help sustainable economic development, unless the economic gains exceed the productivity losses arose from the negative environmental externalities. Furthermore, this paper finds that the effects of renewable energy generation on economic growth are different at a level of development stage: at an early stage, electricity generation from renewable energy resources hurts economic growth while at an advanced-stage, renewable energy helps to grow the economy. The results imply that the very low operating costs for renewable energy could offset the huge financial burden of high initial investment costs in the long run.
... In fact, Feyrer et al. (2017) find that one million dollars of new oil and gas production in the US is associated with an $80,000 increase in wage income. In general, oil exploitation can generate positive spillovers in the the local economy via local labor markets (Black et al., 2005;Jacobsen and Parker, 2016;Weber, 2012). In our setting, oil activity might disincentivize human capital accumulation by increasing the economic activity in the vicinity of the schools. ...
... This seems to be the driving force behind the decrease in tertiary education enrollment identified in this paper. Our results align with previous literature in pointing out the existence of positive spillovers on local labor markets caused by natural resource exploitation (Black et al., 2005;Jacobsen and Parker, 2016;Weber, 2012), particularly for economic activities that do not require professional workers, such as construction and retail (Marchand, 2012). Furthermore, together with our identification strategy, this mechanism appears to be the most relevant in explaining our results. ...
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Technical Report
This paper explores the impacts of oil exploitation on human capital accumulation at the local level in Colombia, a resource-rich developing country. We provide evidence based on detailed spatial and temporal data on oil exploitation and education, using the number of wells drilled as an intensity treatment at the school level. To find causal estimates we rely on an instrumental variable approach that exploits the exogeneity of international oil prices and a proxy of oil endowments at the local level. Our results indicate that oil has a negative impact on human capital since it reduces enrollment in higher education. Furthermore, it generates a delay in the decision to enroll in higher education and leads students to prefer technical areas of study and programs in social science, business, and law. However, we do not find any effects on quality or tertiary education completion. Our results are robust to a number of relevant specification changes and we stress the role of local markets and spillovers as the main transmission channel. In particular, we find that higher oil production causes an increase in formal wages but that there is no premium to tertiary education enrollment.
... Additional conventional reserves in Texas using traditional methods also produce oil and gas, accounting for 41% of domestic crude oil production (U.S. Energy Information Administration 2019). This industry provides substantial economic activity for local communities (Brown et al. 2019;Weber 2012). When an oil and gas industry enters a community, there are measured and posited local economic benefits. ...
... When an oil and gas industry enters a community, there are measured and posited local economic benefits. such as new job opportunities (Maniloff and Mastromonaco 2017;Weber 2012), increased regional tax revenue (Kargbo et al. 2010;Weber et al. 2016), and increased household income (Brown et al. 2019;Feyrer et al. 2017;Hardy and Kelsey 2015). For instance, the Barnett Shale in the Dallas-Fort Worth-Arlington metropolitan region of Texas was projected to yield an increased revenue of $11 billion USD and create more than 100,000 new jobs in the early years of development (Kinnaman 2011;Sovacool 2014). ...
Article
Background: Oil and natural gas extraction may produce environmental pollution at levels that affect reproductive health of nearby populations. Available studies have primarily focused on unconventional gas drilling and have not accounted for local population changes that can coincide with drilling activity. Objective: Our study sought to examine associations between residential proximity to oil and gas drilling and adverse term birth outcomes using a difference-in-differences study design. Methods: We created a retrospective population-based term birth cohort in Texas between 1996 and 2009 composed of mother-infant dyads (n=2,598,025) living <10km from an oil or gas site. We implemented a difference-in-differences approach to estimate associations between drilling activities and infant health: term birth weight and term small for gestational age (SGA). Using linear and logistic regression, we modeled interactions between births before (unexposed) or during (exposed) drilling activity and residential proximity near (0-1, 1-2, or 2-3km) or far (3-10km) from an active or future drilling site, adjusting for individual- and neighborhood-level characteristics. Results: The adjusted mean difference in term birth weight for mothers living 0-1 vs. 3-10km from a current or future drilling site was -7.3g [95% confidence interval (CI): -11.6, -3.0] for births during active vs. future drilling. The corresponding adjusted odds ratio for SGA was 1.02 (95% CI: 0.98, 1.06). Negative associations with term birth weight were observed for the 1-2 and 2-3km near groups, and no consistent differences were identified by type of drilling activity. Larger, though imprecise, adverse associations were found for infants born to Hispanic women, women with the lowest educational attainment, and women living in cities. Conclusions: Residing near oil and gas drilling sites during pregnancy was associated with a small reduction in term birth weight but not SGA, with some evidence of environmental injustices. Additional work is needed to investigate specific drilling-related exposures that might explain these associations. https://doi.org/10.1289/EHP7678.
... In turn, Sarawak was ranked as the second highest in Malaysia to have poverty incidence rates of 0.6% in 2016 (see Economic Planning Unit, 2016). These observations are consistent with the literature that shows the natural resources industry does not contribute significantly to the socio-economic development in a region where the industry is located but rather widen up income inequality (see for example, Weber, 2012;Munasib and Rickman, 2015;Gerelmaa and Kotani, 2016). ...
... For other countries, empirical evidences for the impacts of petroleum industry on its own industry and other industries at the regional level is abundant. These include the works by Papyrakis and Gerlagh (2007), James and Aadland (2011), Weber (2012), Brasier et al. (2014, Haggerty et al. (2014), Maniloff and Mastromonaco (2014), Munasib and Rickman (2015) and Paredes et al. (2015). Among these studies, Papyrakis and Gerlagh (2007) and James and Aadland (2011) reveal a negative link between economic growth and natural resources across regions in the United States. ...
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Article
Extraction of natural resources has created significant contribution to the Malaysian economy as a whole. However, the growth and development of the industry do not necessarily bring considerable economic linkages to the local economy where the industry is located, thus fail to contribute to the welfare of local households. This paper validates this claim by examining the economic impacts of Crude Oil and Natural Gas; Petroleum Refinery; and Forestry and Logging industries on the state of Sarawak. For an empirical analysis, a regional input-output model that developed by using a so-called Simple Location Quotient technique, is used as the main methodology in this study. Results are consistent with our claim that the three industries show significant impacts on growth that measured by value added. However, socio-economic impacts that measured by employment are considerably low. The lower employment impacts can be supported by the two stylized facts. First, the extraction of natural resources is capital-intensive production. The activity requires skilled workers, which might be one of the factors contributing to lower income and job opportunities. Second, the industries are highly dependent on inputs from other states and from abroad, which eventually creates lower economic spill over effects within the state economy.
... Komarek also finds no response to the energy boom in terms of total population, suggesting little permanent migration as a result of energy extraction. Similarly, Cosgrove et al. [8] and Weber [9,10] find some evidence of positive employment effects in the US labor market in resource extraction. ...
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Article
This paper is designed to determine whether producing oil and gas via shale has an economically significant effect on population migration dynamics and on the labor market in terms of the number of employed individuals, the number of establishments, total wages, and average annual pay per person in twenty-six counties in Ohio and Pennsylvania, USA. The analysis incorporates migration inflow and outflow between producing and nonproducing counties. The results of the analysis show that the counties that engage in shale gas extraction saw a negative impact on net migration but a much larger positive impact on labor market outcomes. Specifically, the number of jobs is higher by 2.4%, the number of establishments is higher by 1.1%, total wages are 3% more and the average annual pay is 1.5% more in producing counties after shale. The analysis reveals a small but statistically significant negative impact on migration, as shale regions experienced some migration outflows.
... The need for global and rapid urbanization and industrialization, quest for economic growth and the attainment of energy security, independency and sustainability has led to an increase in the exploration and transportation of crude oil. Weber and Jeremy (2012) argued that for a country or region to be thought of as been industrialized, energy must have been used for the production of goods and services, and to generate income and employment. This shows the importance of oil exploration considering the fact that most material used as finished products in almost all industries have their sources of raw materials gotten from products of oil exploration. ...
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International Oil Companies (IOCs) are constantly interested in expanding or diversifying their investment portfolios and as such searching for markets that are favourable for these purposes. A major determinant in the making of investment decisions in the oil and gas industry in any country or region is the Petroleum Fiscal System (PFS). It helps describe the relationship between the Host Government (HG) of the oil-producing region and the IOC involved in terms of profits sharing. For this purpose, finding the comparative analysis of each country's fiscal system for performance becomes imperative as it directly involves the IOCs. In this study, a comparative performance analysis of fiscal systems is carried out for the four largest producers of Oil in Africa namely; Nigeria, Angola, Algeria, and Libya. An economic model is developed for these countries for a 25 years' timeframe incorporating features of each fiscal system. A wide range of economic indicators were used for the purpose of comparison in this study such as Internal Rate of Return (IRR), Net Present Value (NPV), Discounted Net Cash Flow (DNCF), Profitability Index (PI), Contractor take (CTake), Government Take (GTake) and Payback Period (PP). A brief summary of the results gotten show that Algeria had the most NPV of the four countries with $8.3 billion and Nigeria had the lowest with $2.3 billion. Angola had highest Contractor take (CTake) to be 27.21%. Generally, all four countries had positive returns on investments with each having different rates. This gives HG, Petroleum analysts and most importantly IOCs a varied option of performance indicators for making policy decisions. Also a SWOT analysis is carried out in terms of their management structure, geographical location, political and social state of each country.
... Overall, literature on natural resource rent has provided empirical evidence to support two outcomes. One strand of literature supports the resource bless hypothesis, which posit that natural resources are the main engine of sustainable economic growth and development (James, 2015;Michaels, 2011;Adabor and Buabeng, 2021a;Weber, 2012). Thus, natural resources provide the needed energy for social and economic development. ...
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Article
Purpose While the relationship between natural resource rent and economic growth is well documented in the literature, not much robust analysis has been done to estimate the causative relationship between oil resource rent and economic growth in Ghana. This might be due to the fact that commercial production of crude oil started not long ago in Ghana. This paper aims to examine the causal relationship between oil resource rent and economic growth for the period of 2011 to 2020 in Ghana. Design/methodology/approach The study incorporates economic growth as a function of oil resource rent, non-oil revenue, foreign direct investment, capital and interest rate in a Cobb–Douglass production function/model. The study used four different estimation strategies including the autoregressive distributed lags model, Toda–Yamamoto test approach, nonlinear autoregressive distributed lags model and nonlinear Granger causality. Findings The main finding revealed that 1% increase in oil resource rent generates 0.84% increase in economic growth of Ghana in the long run. Contrary, the authors find an insignificant positive effect of oil resource rent on economic growth of Ghana in the short run for the period under study. The result from the Toda–Yamamoto test approach also showed a unidirectional causality running from oil resource rent to economic growth of Ghana, providing evidence in support of the resource blessing hypothesis in Ghana. The results are robust to two different alternative estimation strategies. Originality/value The causal relationship between crude oil resource rent and economic growth is examined.
... From a regional economics perspective, this creates additional employment opportunities and likely generates positive externalities across specific industries (for example, retail and construction). A significant amount of research has documented the regional economic impacts associated with the rise in drilling, including those for employment and income [1][2][3][4][5][6][7]. Alternatively, several studies have examined negative externalities associated with the drilling increase, such as exacerbated educational attainment or declines in well-being in regions with high levels of drilling activity [8,9]. ...
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Article
Shale energy development activity may benefit some aspects of a regional economy (such as increased jobs or tax revenue); however, there may also be negative impacts to the local environment , such as noise and underground water contamination. We study the impact of unconventional drilling activity on housing price in an area of the country with a long history of crude oil production. A prospective home buyer may want to avoid a place near sites that have been drilled using unconventional drill technologies such as horizontal fracturing. Adopting a hedonic price model, we estimate the impact of distance to and density of unconventional drilling on housing prices in two central counties in Oklahoma during the period 2001-2016. We also apply a semiparametric approach to deal with the possibility that the relationship between an environmental pollutant source and housing price is nonlinear. The empirical results are consistent in terms of physical housing characteristics and locational aspects in all cases, with drilling activity having only a minimal effect in benchmark models. Further, the semiparametric estimation results support the findings that drilling activity has only limited impacts on local housing prices.
... Oil and gas companies have argued that the expansion of oil and gas development during the boom period had a significant positive impact on local economies, including increased income and job growth (API 2017). The academic literature, however, has found mixed results in terms of the local economic benefits of the post-2000 oil and gas boom (Weinstein, Partridge, and Tsvetkova 2018;Agerton et al. 2017;Feyrer, Mansur, Sacerdot 2017;Maniloff and Mastromonaco 2017;Tsvetkova and Partridge 2016;Lee 2015;Michieka and Richard 2015;Munasib and Rickman 2015;Paredes et al. 2015;Weinstein 2014;Weber 2012). Overall, the research points to local economic benefits from oil and gas development, but there is some variation by region and in terms of the magnitude of the effects. ...
... Previous empirical literature has examined the effects of the state's political environment on oil and gas development and found that price rather than politics determined oil and gas development (Maguire 2012). Although, on federal lands, the regulatory environment was a key factor in the amount of oil and gas leasing (Maguire 2016). 2 Other work has examined the effects of oil and gas development on regional economic outcomes such as unemployment with mixed results (Lee 2015;Munasib & Rickman 2015;Weinstein 2014;Weber, 2014;Weber 2012;Michaels, 2010). ...
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Article
Oklahoma assesses a production tax of seven percent on the extraction of oil,natural gas, and other minerals. However, since July 2002, it has taxed productionfrom horizontal wells at one percent for the first 48 months of production. This isa significant tax incentive relative to the neighboring state of Texas, particularlyconsidering the limited evidence of the effectiveness of severance tax incentivesfor increasing in-state development of immobile resources. This paper examineswhether the tax incentive encouraged horizontal development in Oklahoma relativeto Texas. Our findings indicate that the incentive is not associated with an increasein development.
... Oil and gas resources are natural wealth or asset, which contribute immensely to economic growth and development across different countries (Badia-Miró et al., 2015;Gylfason, 2002). These natural resources are highly valuable because of their enormous impact on the economy in the form of employment, revenue contribution, social contribution and poverty reduction (Bornhorst et al., 2009;Freudenburg & Gramling, 1994;Weber, 2012). For instance, the resource sector provides employment opportunity and livelihood in poor communities via provision of infrastructure in areas where they are located. ...
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We investigate the asymmetric effect of oil and gas resource rent on economic growth of Ghana for the period 2010 to 2019, dwelling on the hypothesis that natural resources extraction has double-edge effect on economic growth. Using Nonlinear Autoregressive Distributed Lag (NARDL) model as estimation strategy, we find that oil and gas resource rent affect economic growth asymmetrically. Specifically, our NARDL estimates suggest that oil resource rent promotes economic growth significantly, providing empirical evidence in support of the resource blessing hypothesis. However, gas resource rent exerts a significant adverse effect on economic growth, providing empirical evidence to support the resource curse hypothesis. Our findings point to the need for policies that promote the expansion of oil resources firms than gas resource firms in the short run while long term policies should target setting up both oil and gas resource firms in developing countries, especially countries with similar socioeconomic and demographic setting like Ghana. Finally, government and monetary authorities should promote policies that attract foreign direct investment inflow in Ghana while taming inflation and lending rate towards growth enhancing targets.
... Beine et al. (2012) [88] argued that failing to separate the expansion of the Canadian dollar from the growth of the US dollar contributes to possibly inaccurate conclusions about the Dutch Diseases instance in Canada. Weber (2012) [89] discovered that a boost in the value of natural gas led to small gains in labor, wage and salary earnings, and median family income. In order to comprehend the "Resource Curse", Bjorvatn et al. (2012) [90] looked into the function of political socioeconomic disparities. ...
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Article
Over the past few decades, the wealth of Africa has not made African wealthy. There is a voicing that Africa is cursed, whether richly poor or poorly rich. Sub-Saharan Africa is commonplace for political turbulence, as well as humanitarian and economic misery. In such a catastrophic situa-tion, political economics studies have focused on the Resource Curses, Dutch Diseases, and Con-flict Resources in this area. A systematic scientometric analysis of this field would be beneficial but is currently lacking in the academic literature. Using VOSviewer and CiteSpace, this review fills the void by analyzing the 1783 articles published in the WoS SSCI Collection between 1993 and 2020 on the “Resource Curses”, “Dutch Diseases”, and “Conflict Resources”. The author dis-cusses recent papers with disruptive potential, references with the most robust citation explora-tions, and cooperation networks between authors and institutes. Three hotspots were detected: the causes and effects of the Resource curses; the interaction among the Resource Curses, Dutch Diseases, and Conflict Resources; the factors that affect rent collection and regime resilience. While the literature on the “Resource curse” and “Dutch Disease” has been around longer, studies on “Conflict Resources” are picking up quickly. Conflict Resources were characterized by active citation exploration keywords and multiple active co-citation clusters, including possibly groundbreaking articles. There is a massive overlap between the three strings of literature, but each one has its emphasis.
... Understanding the determinants of natural gas supply is important because of its significance for the U.S. power sector (Peters and Hertel, 2017;Stephens, 2018) and U.S. economic activity in general (Arora and Lieskovsky, 2014;Melick, 2014;Weber, 2012;Joskow, 2013). 1 Previous academic literature relied on drilling rig activity (the count of actively drilling rigs) as the primary determinant of oil and gas production because of the simplicity, availability, and global applicability of drilling rig count as an indicator (Apergis, Ewing and Payne, 2016;Melek, 2015). The oil and gas industry also has been relying on the rig count as a measure of oil and gas production activity. ...
Article
Unconventional oil and gas development (UOGD) has become the most widespread form of energy production in the United States. The booms and busts associated with UOGD are not unique to the industry, but the impacts to local communities are. As the industry continues to dominate the nation's energy landscape, and marginalized communities are disproportionately exposed to the extraction processes, it is important to understand the full scope of the environmental and social impacts experienced by communities during booms and busts. We review the literature on both the ecological and social boom-bust impacts of UOGD, noting the dearth of research on bust-time impacts. We conclude by calling for greater research on the long-term impacts of busts, in particular, and on understudied aspects of social impacts like those to public services, infrastructure, and social capital.
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Child food security is a longstanding concern to policymakers, exacerbated by economic slack and instability. We use the fracking era oil and gas boom of the early 2000s as a natural experiment to examine the importance of state economic conditions for child food security. The fracking boom was a large and unexpected economic shock that substantially improved labor market conditions in states with oil and gas resources but not elsewhere. We find that increases in oil and gas labor income improve child food security, especially for children with less educated parents and those residing in single‐mother households.
Article
Innovation in hydraulic fracturing methods and micro-seismic technology, along with higher energy prices until 2014, led to oil and gas booms in various U.S. shale plays. While this appears to be a positive event for the country, it is unclear whether and how local communities benefit in the long-term from unconventional gas development. This paper evaluates the impact of oil and gas development on occupation-specific job growth in resource-intensive economies using a unique dataset with annual county employment at the 2- and 5-digit 2010 Standard Occupation Classification (SOC) code combined with education, experience, and training requirements from the O*NET database. Using a first-difference methodology, we find that oil and gas booms have a significant positive impact on occupational job growth in derrick, rotary drill, and service unit operators, truck drivers, secretaries, and engineers, with human capital requirements ranging from less than a high school diploma to at least a bachelor's degree. While occupations associated with oil and gas development and their human capital requirements vary, the results suggest that many of these occupations require workers to have vocational and technical training in addition to a high school diploma, thereby indicating greater demand for workers with intermediate skills in affected areas. Changes in human capital composition resulting from oil and gas development could have significant impacts on a region's ability to respond to energy busts and affect its economic resilience.
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Leaving school to work trades off schooling with on‐the‐job human capital acquisition. How do industry shocks impact how youth make this trade‐off? Exploiting the geography of natural resources, I estimate the effect of oil and gas job prospects on college and work outcomes. Using CPS data, I find that these job opportunities decrease college‐going for men but not women. I next assess the importance of this schooling loss for later outcomes using longitudinal geocoded NLSY79 data. I find permanent declines in college attainment but gains in employment and earnings at ages 25–30, driven by cohorts who reach college age during industry booms. The results suggest that informal human capital can compensate for schooling loss for the men who leave school for oil and gas work. They speak to the need for further research on non‐college work as a form of human capital investment outside of the traditional college pathway.
Purpose :The “resource curse phenomenon” has received a lot of attention from researchers; however, there has not been any sound explanation to back this phenomenon since the main reason why natural resource should restrain economic growth instead of boosting economic growth remains unanswered. This paper contributes to literature on “resource curse hypothesis” by examining the role of government effectiveness in influencing the impact of gas resource rent on economic growth. Design/methodology/approach: The study adopted the Cobb-Douglass production and incorporated gas resource rent, institutional quality (government effectiveness), inflation and exchange rate as additional variables that influences total output (gross domestic product). The author estimated the empirical form of the Cobb-Douglass production using autoregressive distributed lag model (ARDL) and Toda and Yamamoto (1995) as the main estimation strategies while other time series approaches were used as a robustness check. Findings: The estimates from the ARDL short-run and the long-run dynamics suggest that the direct impact of gas resource rent on economic growth was positive but not statistically significant. At the same time, the interacting of gas resource rent and government effectiveness showed a positive and statistically significant effect of nearly 0.4123 and 0.8724 on economic growth in the long run and short run, respectively. The results from the Toda and Yamamoto (1995) also indicated that economic growth has a strong influence on gas resource rent while government effectiveness drives economic growth and not vice versa. Research limitations/implications: The findings from this study imply that government effectiveness plays a crucial role in averting the “resource curse phenomenon”. Hence, improving government effectiveness and efficiency through minimising corruption among state institutions would be imperative in curbing the “resource curse phenomenon” in developing countries. Originality/value: The influential role of government effectiveness on the relationship between gas resource rent on economic growth is examined.
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While shale gas could complement the world's natural gas supply, its environmental tradeoffs and sustainability potential should be cautiously assessed before using it to satisfy future energy needs. Shale gas development in China is still in its infancy but has been progressing by the Central Government at a fast pace nowadays. Advanced experience from North America would greatly benefit sustainable design and decision-making for energy development in China. However, the lack of consistency concerning internal and external parameters among previous investigations does not allow an integrated impact comparison among shale gas-rich countries. Herein, we applied a meta-analysis to harmonize environmental tradeoff data through a comprehensive literature review. Greenhouse gas emission, water consumption, and energy demand were selected as environmental tradeoff indicators during shale gas production. Data harmonization suggested that environmental tradeoffs ranged from 5.6−37.4 g CO2-eq, 11.0–119.7 mL water, and 0.027–0.127 MJ energy to produce 1 MJ shale gas worldwide. Furthermore, sustainable development indexes (SDIs) for shale gas exploitation in China were analyzed and compared to the United States and the United Kingdom by considering environmental, economic, and social demand through an analytic hierarchy process. The United States and China elicit higher SDIs than the United Kingdom, indicating higher feasibility for shale gas exploitation. Although China has relatively low scores in the environmental aspect, large reservoirs and high future market demand make Chinese shale gas favorable in the social demand aspect. Region-specific SDI characteristics identified among representative countries could improve the sustainability potential of regional development and global energy supply.
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Some studies suggest that resource-rich countries tend to allocate talent and investment toward the resource sector and away from manufacturing or agriculture reducing the competitiveness of these other sectors. Because mining overwhelmingly employs men, when other sectors shrink so do employment opportunities for women (Ross, 2008). This could significantly affect core social structures. Using plausibly exogenous variation in natural resource wealth due to giant oil discoveries and an event study design, this paper finds that giant oil discoveries are associated with relatively worse female outcomes as measured by higher male/female population ratios, higher teen birth rates, and lower educational attendance of tertiary education among women relative to men. However, the impact on health outcomes tapers off within 8 years. Additionally, during periods of increasing oil prices, there is no significant evidence of such effects possibly due to an income effect.
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We examine how large and localized resource discoveries affect long-run population growth in the United States, and examine how these shocks interact with pre-existing geographic properties of the discovery site. Using a dynamic event study analysis and developing novel, geographically delineated measures of both amenity value and geographic isolation, we find that resource discoveries cause population to grow both in the short and long-run (e.g., fifty years). However, this effect is largely driven by discoveries in unfavorable locations that might struggle to grow in the absence of a resource discovery. More generally, this paper highlights the importance of considering heterogeneous effects of resource shocks and yields insights into the observed spatial distribution of people in the United States.
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The U.S. coal industry is in the midst of a transition. Changes in regulation and technological innovation from other fossils and renewables have affected its competitiveness. These could have significant impacts on the labor market where jobs could be lost. In this study, we investigate how changes in employment in the coal industry affect wages in 20 industries in 10 U.S. coal producing states. We assess how these transitions impact welfare programs, since coal producing regions are associated with higher poverty levels. Results show that in the long run, migration of coal workers decreased wages in the construction, manufacturing sectors. Point estimates reveal that an increase in separations of coal workers increase Supplemental Nutrition Assistance Program (SNAP) caseloads. In states where coal mining has a smaller contribution to GDP, an increase in coal employment increases SNAP caseloads.
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Scholarship on boom-busts cycles in resource extraction often assumes that affected resource-rich communities are at best reactive, at worst helpless, in the face of the large, exogenous shocks this cycle visits upon them. Researchers infrequently examine what communities themselves can do to improve their economic prospects and residents' quality of life amidst booms and busts. In this review paper, we identify and synthesize work scattered across disparate academic and gray literature—in planning, law, community economic development, rural sociology, economics, and political science, among others—to holistically assess what we know about how communities can use local policymaking to manage impacts of booms and busts associated with unconventional oil and gas drilling (UOGD), often called “fracking.” We highlight examples of communities tackling this task using vertical and horizontal governance strategies and distill expert recommendations for how communities can build boom-bust resiliency generally and in key areas impacted by UOGD. © 2022 The Authors. Review of Policy Research published by Wiley Periodicals LLC on behalf of Policy Studies Organization.
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This study presents an intensive survey of literature focused on the different aspects of fracking potential impacts as related to Nigeria economy, social and environmental sustainability and establishes an understanding of the potential benefits and impacts of fracking on diverse spectrum of sustainability. The development of more innovative ways to limit the environmental damages of the fracking process should be on the priority list of the construction and engineering community’s research agendas. Finally, an international assessment of fracking would be very useful in addressing the opportunities and threats of the fracking process.
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The study aims to examine Ross's (2008) hypothesis providing new empirical evidence by considering the oil intensive country of Saudi Arabia. Using an autoregressive distributed lag (ARDL) bounds test, we identified that oil production correlates negatively with female participation in the labour force, supporting Ross's argument that in countries rich in oil production there is a resulting lack of female representation in the labour force. Our results remain robust when using alternative measures of oil resources. In addition, by sector our empirical investigation shows that while oil wealth hinders female employment in the tradable sector (industry), it fosters female employment in the non-tradable sectors (services) of the Saudi economy. Thus, the findings suggest that the harmful impact of oil wealth on female employment in Saudi Arabia is more pronounced in the industry sector than in services. Great attention needs to be directed by government to adopt economic strategies that focus on developing manufacturing-based industries coupled with greater expansion in the services sector, apart from oil activities to create wider employment opportunities for females.
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This study employs macroeconomic variables and economic indices to forecast natural gas volatility. The out-of-sample results show that the forecasting performance of the macroeconomic variables outperforms the economic indices. Additionally, the forecasting performance of the mixed data sampling model, which combines the least absolute contraction and the selection operator (MIDAS-LASSO), is better than that of other competing models, and it still has a good predictive ability under certain conditions (e.g., business cycles). Our study confirms the superiority of the MIDAS-LASSO model for natural gas volatility forecasting.
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This paper explores the effects of giant oil discoveries on innovation for a sample of 179 countries for the period 1975-2005. Evidence indicates that innovation activity slows down after oil discovery. Using a difference-in-differences design, we show that, on average, patent citations decline by 2.4% per year, and the number of actual patents slows down by approximately 2.5% per year. These results are consistent with the notion of the natural resource curse, a phenomenon where resource-rich economies have inferior growth performance relative to resource-poor economies. Cross-sectional analyses indicate that changes in innovation activities are greater in common law countries. We show that governance quality is a possible channel through which decline in innovative activity occurs after a resource windfall.
Technical Report
From the early 19th century, Appalachia was the primary U.S. coal producer, but over the course of the last century, its coal industry evolved and ultimately faded from market dominance. This transition took a very long time, and spanned periods of boom and bust, new mine openings and mine closures, as well as wide-ranging economic development unrelated to coal, all of which shaped coal sector employment in the region’s coal communities. During the past 70 years, coal sector performance exhibited significant heterogeneity in the timing of coal-related business cycles and in spatial concentration. The 1950s and most of the 1960s saw the closure of many marginally-productive mines on the outer fringes of Appalachia, squeezed out by technology-aided competitors. Many Appalachian counties experienced a surge in coal employment during the 1970s, followed by mine closures during the “bust” years of the 1980s and during the 1990s with the tightening of environmental regulations
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Background Oil and gas extraction produces air pollutants that are associated with increased risks of hypertension. To date, no study has examined residential proximity to oil and gas extraction and hypertensive conditions during pregnancy. This study quantifies associations between residential proximity to oil and gas development on gestational hypertension and eclampsia. Methods We utilized a population-based retrospective birth cohort in Texas (1996–2009), where mothers reside <10 km from an active or future drilling site (n = 2 845 144.) Using full-address data, we linked each maternal residence at delivery to assign exposure and evaluate this exposure with respect to gestational hypertension and eclampsia. In a difference-in-differences framework, we model the interaction between maternal health before (unexposed) or after (exposed) the start of drilling activity (exposed) and residential proximity near (0–1, >1–2 or >2–3 km) or far (≥3–10 km) from an active or future drilling site. Results Among pregnant women residing 0–1 km from an active oil or gas extraction site, we estimate 5% increased odds of gestational hypertension [95% confidence interval (CI): 1.00, 1.10] and 26% increased odds of eclampsia (95% CI: 1.05, 1.51) in adjusted models. This association dissipates in the 1- to 3-km buffer zones. In restricted models, we find elevated odds ratios among maternal ages ≤35 years at delivery, maternal non-Hispanic White race, ≥30 lbs gained during pregnancy, nulliparous mothers and maternal educational attainment beyond high school. Conclusions Living within 1 km of an oil or gas extraction site during pregnancy is associated with increased odds of hypertensive conditions during pregnancy.
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This paper examines public perceptions of shale gas development in China and the United States. Public perceptions are important, as they are known to influence public policy at national and local levels of government in both multi-party and single-party governance systems. Online surveys were conducted in several states/provinces in each country, the US survey in 2014 (N = 2833); the China survey in 2016 (N = 1571). Similar survey instruments were used in both countries. The survey results show that the reported levels of public support for shale gas development among Chinese respondents in select provinces are significantly higher than that among US respondents in the states included in this study. Perceptions of the advantages and disadvantages of shale gas have both similarities and differences. Shale gas is perceived favorably in both samples because it is seen as a way to reduce dependence on foreign energy suppliers and strengthen the economy. The potential environmental advantages appear to be relatively more important to Chinese respondents than to American respondents. The statement “shale gas development is good for the environment because it substitutes dirty energy such as coal and oil” is seen as “Extremely important” by 54.23% of all Chinese respondents but by only 33.75% of American respondents. When it comes to the potential disadvantages of shale gas development, concerns about impacts on drinking water quality are important in both samples. Earthquakes related to shale gas is the second most important concern to Chinese respondents but a lesser concern to US respondents. We argue that the results are consistent with risk experiences, a variety of socio-cultural theories, and differences in media coverage in the two countries. Future work should examine how public perceptions in the two countries change over time, and how the stances of environmental groups, government, and industry may influence public opinion.
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This paper examines whether laws requiring oil and gas firms to disclose the chemicals used in their fracking operations affect the mortgage lending activity for properties located in nearby areas. I hypothesize and find that the disclosure mandate reduces uncertainty about the value of housing collateral and subsequently increases (1) the probability of obtaining a mortgage by 2.5 percentage points (pp), and (2) loan-to-value by 2.2 pp. My main analyses exploit the variation in the location of properties relative to fracking wells. Cross-sectional tests that exploit heterogeneity in drinking water sources and the content of firm disclosures further substantiate my inferences and mitigate endogeneity concerns. These findings suggest that disclosure regulation for oil and gas firms affects housing collateral values, thereby impacting the mortgage market. JEL Classifications: G14; G21; G32; G38; K22; L71; M41; M48.
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This paper aims to bridge part of the gap that exists between the resource curse literature and economic historical research on natural resources by analysing four resource-abundant countries. The study proposes that at the sectoral level, the determinants of growth in resource-based industries were mostly similar in the late 19th and late 20th centuries. However, we also argue that the relative contribution of natural resources to economic growth might have been declining during the late twentieth century. The evidence comes from an analysis of the forestry sector in Finland and Sweden between 1860 and 1910 and the palm oil industry in Indonesia and Malaysia between 1970 and 2016.
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Revenues from oil and gas development play a key role in the economies of many states in the United States, but there are environmental concerns such as local air and water pollution, land cover changes and fragmentation, and negative effects on wildlife. These concerns were exacerbated as oil and gas production reached historic highs due to the expanded use of hydraulic fracturing technology beginning in the mid-2000s. This paper examines the influence of oil and gas development on breeding bird communities in the High Plains ecoregion of Colorado between 2003 and 2018. Specifically, we investigated whether oil and gas drilling or production affected species richness or evenness of bird communities. Our findings indicate that a decrease in producing well density or the number of producing fracking wells were associated with an increase in evenness of the overall bird community and grassland species richness, but disturbances from well drilling generally did not have a statistically significant influence on bird communities. We also found that a decrease in tree cover was associated with an increase in species richness and evenness of the overall bird community.
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Malthusian population theory states that, when population growth exceeds the growth of the means of production, socioeconomic development will be hindered. This paper analyzes this issue from the perspective of uncoordinated urbanization. We used the data available for 262 cities at the prefecture level and above in China, for the years 2000, 2005, 2010, and 2015. We empirically investigated the relationship between uncoordinated urbanization and urban economic growth. We also examined how this relationship is affected by natural resource constraints. The research results show that there are temporal and spatial differences in the distribution of uncoordinated urbanization in China. From a temporal perspective, from 2000 to 2015, 45.61% of China’s 262 cities show under-urbanization, while 36.45% of cities show over-urbanization. However, the number of cities with over-urbanization is growing. From a spatial perspective, the number of cities in the northeastern region with over-urbanization is declining. Conversely, the number of cities with over-urbanization in Beijing in the central and southeastern coastal areas is increasing. Empirical research shows that uncoordinated urbanization and urban economic growth have an inverted U-shaped relationship. Abundant natural resources can make the inverted U-shaped curve of uncoordinated urbanization and economic growth flatter. The “resource curse” seems to occur only under high levels of uncoordinated urbanization (over-urbanization). For some cities where there is under-urbanization, abundant natural resources are conducive to urban economic growth.
Article
Climate change, the imbalance between China’s domestic energy supply and demand, and the success of the shale gas revolution in the United States have been the main motivators for China to actively issue shale gas development policies and explore its own path on this industry. This paper estimates three indicators of economic development: regional GDP, employment level, and the housing price index by using data from China’s largest shale gas region, the Fuling District in Chongqing (a municipality in China). The analysis uses a Synthetic Control Method (SCM) model based on data from Fuling itself and other 34 counties of the Chongqing municipality over the period from 2005 to 2018. The results demonstrate that shale gas development has a significant positive effect on both regional GDP and employment level, with average impact growth rates respectively of 9.8% and 12.0%. By contrast, we find an insignificant effect of shale gas development on housing prices. These results support the case for further development of shale gas in China. Note that in some areas our results differ from existing literature, providing a reference for further research in this area.
Article
With the maturity of horizontal drilling and hydraulic fracturing technologies, countries rich in shale gas have begun to promote the development of the shale gas industry. The impact of the booming shale gas industry on the regional economy has also become a main focus. Shale gas’ exploration and extraction may have positive spillover effects on other sectors, resulting in population growth and job creation. However, negative spillover effects can occur through rising local goods prices and its adverse effects on the local quality of life, which in turn could harm population growth and employment. By using the synthetic control method, we investigates the shale gas fields in Chongqing to reveal the relationship between population growth, employment and shale gas development in Fuling, Nanchuan and Wulong districts. Our results indicate that due to the development of the shale gas industry, the number of urban non-private sector employees in three districts and counties has decreased. From 2017 to 2018, this decline had gradually weakened and the population growth had been negatively affected.
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In this paper, we show that labor market shocks that overwhelmingly directly impacted specific workers (male workers and workers with a high school education) in a specific industry (oil and gas sector) can have meaningful effects on employment and earnings differentials within sectors not directly impacted by the productivity shock. Empirical estimates suggest that college/high school earnings differentials decreased by 3.0% in the non-mining sectors, while male/female earnings differentials increased by 2.6% in the non-mining sectors. Results highlight the importance of considering differential effects of technology shocks by education and gender in studying earnings inequality.
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We use the synthetic control method to determine the economic impact of the shale boom to Ohio, Pennsylvania, and West Virginia. Estimation results are mixed. The shale development decreased the poverty rate and increased the employment growth rate in Pennsylvania and West Virginia in the short run. Top oil and gas producing counties in West Virginia also experienced short‐term personal income growth due to fracking. However, most of the positive impacts disappeared a few years after the initial boom periods. The shale development did not bring significant economic benefits to Ohio. Further, shale drilling activities exert a potential long‐term negative effect on population growth in all three states.
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Consumer debt is an important vehicle for smoothing through income shocks. I study localized income shocks from oil and gas development to investigate consumer response. Using quarterly information on consumer debt and oil and gas activity between 2000 and 2016, I find that consumer debt increased at a peak of $660 per capita, equivalent to 1.3% of median household income in counties with shale endowment and increased drilling. Shocks to local wages via drilling revealed a marginal propensity to borrow of 0.45. Relative to areas with oil and gas development experience, the marginal propensity to borrow was two times larger in previously undeveloped areas.
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We analyze the impact of oil and gas booms on local environmental quality in school districts in Texas between 2010 and 2014. Using data from the Toxic Release Inventory (TRI) and County Business Patterns, we distinguish economic activity associated with potential and actual polluters. We find that the presence of oil and gas resources in a school district has spillover effects in terms of economic activity by attracting more potentially polluting firms. Oil abundance also generates an actual environmental burden for school districts located in MSAs as the proportion of firms that actually report a release of toxic chemicals to the TRI increases with oil revenue.
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The shale gas boom revolutionized the energy sector through hydraulic fracturing (fracking). High levels of energy production force communities, states, and nations to consider the externalities and potential risks associated with this unconventional oil and natural gas development (UOGD). In this review, we systematically outline the environmental, economic, and anthropogenic impacts of UOGD, while also considering the diverse methodological approaches to these topics. We summarize the current status and conclusions of the academic literature, in both economic and related fields, while also providing suggested avenues for future research. Causal inference will continue to be important for the evaluation of UOGD costs and benefits. We conclude that current economic, global, and health forces may require researchers to revisit outcomes in the face of a potential shale bust. Expected final online publication date for the Annual Review of Resource Economics, Volume 13 is October 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
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Advancement in drilling technology has increased natural gas extraction activities from the Marcellus shale deposit resulting in a shale gas boom in many regions, including West Virginia. This boom has created a significant labor demand shock to local economies experiencing the boom. A number of studies have shown that a shale gas boom directly increases employment and the income of those working in the industry. However, the boom can also have an adverse impact on other sectors through the resource movement effect and intersector labor mobility, pulling workers away from a related sector like forestry. Thus, an econometric model of employment in the forestry sector was developed to investigate the impact of the Marcellus shale gas boom in West Virginia. There is evidence of a labor movement effect with forestry employment negatively affected by the Marcellus shale boom. Specifically, the overall marginal effect of the shale boom on forestry employment is approximately 435 fewer jobs. However, the extent of the decline is slightly moderated by a higher relative wage between gas and forestry, perhaps suggesting diminishing returns and overall slack in the local labor market. Study Implications Although a Marcellus shale gas boom directly increases employment and the income of those working in that industry, it can have an adverse impact on other sectors by pulling workers away from a related sector like forestry. This study showed that employment in the West Virginia forestry sector was negatively affected by the shale gas boom. An important policy issue is how to manage the cyclical nature of shale gas booms and the negative impacts on other industries with long-term growth potential, like the forestry sector. This sector does not suffer through boom-and-bust cycles, making it important for long-term economic stability.
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There are frequent and increasing conflicts between energy development and agricultural land use. In these debates, claims are commonly made that energy income can improve farm viability. We develop a conceptual model that provides a framework for when and how energy income could improve farm viability. If farms face difficulty accessing credit, they invest at below optimal levels. In such cases, energy income may be used to increase investment, thus strengthening the farm economy. We test the predictions of this model with detailed, nationally representative U.S. Department of Agriculture farm survey data. This large, cross sectional dataset is well suited to propensity score matching and allows us to test whether observationally similar farms with and without energy income have different levels of credit access and capital investment. We are able to test whether model outcomes are similar under different farm and energy income definitions. Overall, we find little evidence that energy income improves credit access or increases capital investments. This suggests that on average the benefits of energy income for farm household consumption do not necessarily extend to the farm economy or agricultural production.
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This paper provides new empirical evidence on the impact of the shale gas revolution on manufacturing output and trade in the United States. The shale gas boom has led to significant and persistent regional price differences in natural gas between the United States and the rest of the world. The results show that lower natural gas prices in the United States compared to Europe have led to industrial activity and investment increasing by nearly 3% and 2%, respectively. We provide empirical evidence also of structural breaks in the relationship between natural gas prices and both imports and exports. Finally, we suggest that while the shale gas revolution has helped some industries to expand, its impact on the manufacturing sector as a whole has been relatively weak.
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As for research on sector-coupled energy systems, few studies comprehensively deal with energy carriers and energy demand sectors. Moreover, few studies have analyzed energy conversion functions such as Power-to-Gas, Power-to-Heat, and Vehicle-to-Grid on the energy system performance. This study clarifies the required renewable resources and costs in the sector-coupled energy system and cost-optimal installed capacity and operation. We formulated an optimization model considering sector coupling and conducted a case study applying the model in the Tohoku region. As a result, due to sector coupling, the total primary energy supply (TPES) is expected to decrease, and system costs are expected to increase from 1.8 to 2.4 times the current level. System costs were minimized when maximizing the use of V2G by electric vehicles and district heating systems (DHS). From the hourly analysis, it becomes clear that the peak cut effect by Power-to-Heat and the peak shift effect by Vehicle-to-Grid result in leveling the output of electrolyzer and fuel synthesizer, which improves the capacity factor reducing capacity addition. Since a large amount of renewable energy is required to realize the designed energy system, it is necessary to reduce the energy demand mainly in the industrial sector. Besides, in order to reduce costs, it is required to utilize electric vehicles by V2G and provide policy support for district heating systems in Japan.
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In this paper, we study the impact of the oil and gas industry on county-level employment and wage earnings across not only the boom, but also the bust cycle. Our paper is among the first to estimate wage and employment impacts of the bust cycle for the U.S. oil and gas industry and directly compare these employment and wage impacts for the boom. We then evaluate spillovers into other sectors in the economy, comparing impacts on tradable and non-tradable industries for three distinct geographic regions and estimate separate models for rural and urban areas. We find variation across geographic context, but in general the oil and gas bust was associated with a significant decrease in overall employment, with the effect most notable in non-tradable industries in rural counties. Finally, we investigate the differential impact of the 2008 financial crisis on labor in producing and non-producing counties. We find that, employment and wages in oil and gas producing counties were impacted by the financial crisis less than non-oil and gas counties and recovery in oil and gas counties started earlier.
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This article presents an integrative theoretical framework of subnational natural resource dependence. I argue that rural natural resource dependence represents a special case of the core-periphery relationship, where rural, resource-rich labor markets form a dual dependency on both the global capitalist economy and the local natural environment. This occurs because the contradiction between spatially fixed natural resources and the mobility of capital prompts both external interests and local power elites to use their power to pressure rural labor markets in directions outside their best interest and to exploit rural labor. I argue that both extractive (e.g., mining, timber, agriculture) and nonextractive (e.g., tourism, real estate) forms of natural resource development share this contradiction. Although pushing different uses of the resource base, extractive and nonextractive development do not fundamentally vary in their exploitative relationship with rural labor markets.
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This article suggests an alternative explanation for why resource-rich economies have lower growth rates: because they are likely to be living beyond their means. It is shown that overshooting the steady state's equilibrium consumption and investment can be optimal in a Ramsey growth model with natural resources. Therefore, the economy will converge to its steady state from above, displaying negative growth rates on the transition. A dynamic general equilibrium model is calibrated to the Venezuelan economy and shown to approximate the economy's performance over the oil boom years adequately. Copyright 1999 by Kluwer Academic Publishers
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The existence and persistence of poverty across economic cycles associated with the development of natural resources has long been noted in the literature. Most of the attempts to explain poverty, however, have relied on relatively static models. This case study shows how poverty itself, as well as causal factors, changed during one of the better documented resource developmental cycles and suggests that more than one theoretical orientation may be necessary to assess this complex and fluctuating phenomenon.
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This paper summarizes and extends previous research that has shown evidence of a “curse of natural resources” – countries with great natural resource wealth tend nevertheless to grow more slowly than resource-poor countries. This result is not easily explained by other variables, or by alternative ways to measure resource abundance. This paper shows that there is little direct evidence that omitted geographical or climate variables explain the curse, or that there is a bias resulting from some other unobserved growth deterrent. Resource-abundant countries tended to be high-price economies and, perhaps as a consequence, these countries tended to miss-out on export-led growth.
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This paper examines the impact of oil and gas facilities on rural residential property values using data from Central Alberta, Canada. The influences are evaluated using two groups of variables characterizing hazard effects and amenity effects. A spatial error model was employed to capture the spatial dependence between neighbouring properties. The results show that property values are negatively correlated with the number of sour gas wells and flaring oil batteries within 4 km of the property. Indices reflecting health hazards associated with potential rates of H2S release (based on information from Emergency Response Plans and Zones) also have a significant negative association with property prices. The findings suggest that oil and sour gas facilities located within 4 km of rural residential properties significantly affect their sale price.
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This paper investigates the impact of ethanol production in the Corn Belt states (Iowa, Indiana, Illinois, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin). Employing data at the county level, from 2005 to 2006, we investigate the effect of ethanol production on employment and wages. Our empirical results show that ethanol production has a positive significant effect on employment and wages, but this effect is of insignificant magnitude. We also find that counties with high and medium levels of ethanol production capacity show higher levels of employment and wages than those counties that do not produce ethanol. Counties with low levels of ethanol production do not show any significant difference in employment and wages than non-producing ethanol counties.
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This paper integrates the existing Dutch Disease models of an oil boom into a reduced-form three-sector model and estimates it for five developing oil-exporting countries having significant agricultural and manufacturing sectors. Time-series annual data for the period 1966–1986 are used for Algeria, Ecuador, Indonesia, Nigeria and Venezuela. Their output composition is altered by an increase in their oil revenues, the spending effect, and in the world price of manufactured goods relative to agricultural products, the world-price effect. Both effects expand the manufacturing sectors of these countries and contract their agricultural sectors. The spending effect expands their nontraded sectors whereas the world-price effect may expand or contract them. The opposite results are implied for the oil collapse of the 1980s.
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Common sense and economic theory suggest large revenues from natural resource projects should generate economic progress and development. Yet much evidence argues the opposite and that resource-rich countries suffer from 'resource curse'. This paper provides a survey of the academic literature on the impact of natural resources on an economy. The topic has long attracted interest in the economics literature but more recently, interest has revived. The paper first considers the large body of empirical work examining the relationship between resource abundance, poor economic performance and poverty. While this evidence supports the view of a negative impact, it is not without criticism and some assert a few countries managed instead to receive a 'blessing'. The paper assesses how the literature explains the transmission mechanisms between resource revenues and economic damage. Six areas are discussed: a long-term decline in terms of trade; revenue volatility; Dutch disease; crowding out effects; increasing the role of the state; and the socio-cultural and political impacts. Finally, various options from the literature to avoid negative impacts are analysed: not developing the mineral deposits; diversifying the economy away from dependence on oil, gas and mineral exports; sterilising the incoming revenue; the use of stabilisation and oil funds; and reconsidering investment policies. The paper finishes by assessing what political reforms might be needed to carry out the necessary policies to avoid negative impacts. International Petroleum Industry Environmental Conservation Association (IPIECA)
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Using geological variation in oil abundance in the Southern US, I examine the long term effects of resource-based specialisation through economic channels. In 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production. From 1940-90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing. Oil abundant counties had higher population growth, higher per capita income and better infrastructure. © 2010 The Author(s). The Economic Journal © 2010 Royal Economic Society.
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This article surveys the experiences of commodity-exporting countries faced with resource discoveries and widely fluctuating world prices. Favorable developments of the commodity export market often prove to be a mixed blessing, as poor boom management leads to major internal and external economic imbalances. Many developing countries overconsume during boom periods. More often than not, the unsustainable increases in spending are initiated by the public sector. When the boom ends, tardiness in decreasing government spending and in increasing revenues from nonbooming sectors creates fiscal deficits and monetary control problems. In the 1970s many booming economies allowed regulated price structures, and particularly exchange rates, to deviate substantially from free market levels, discouraging efficient resource allocation and greatly compounding the problems of adjustment to subsequent drops in export prices. Countries that managed booms well were typically those that (a) did not allow fiscal variables, exchange rates, agricultural producer prices, and wages to get badly out of line, (b) avoided indulging in wasteful and inefficient investment or investment that involved burdensome recurrent costs, (c) limited increases in government spending to levels consistent with long–term trends in revenue collection, and (d) maintained prudent external borrowing and foreign exchange reserve policies.
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This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables. The weights applied to individual regressions are justified on Bayesian grounds in a way similar to the well-known Schwarz criterion. Of 32 explanatory variables we find 11 to be robustly partially correlated with long-term growth and another five variables to be marginally related. Of all the variables considered, the strongest evidence is for the initial level of real GDP per capita ... Ce document examine la robustesse des variables explicatives dans le cadre de régressions internationals pour la croissance économique. Les résultats sont obtenus en utilisant une nouvelle méthode « Bayesian Averaging of Classical Estimates » (BACE), qui construit les estimateurs comme la moyenne pondérée des estimateurs des MCO pour chacune des combinaisons de variables. Les poids appliqués aux regressions sont justifiés sur la base d’un critère bayesien dans une façon similaire au critère bien connu de Schwarz. Sur les 32 variables explicatives, nous trouvons onze variables robustes partiellement corrélés avec la croissance à long terme et cinq autres variables qui sont marginalement liées. De toutes les variables considérées, le résultat le plus probant est obtenu pour le niveau initial du PIB par habitant ...
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Weak instruments can produce biased IV estimators and hypothesis tests with large size distortions. But what, precisely, are weak instruments, and how does one detect them in practice? This paper proposes quantitative definitions of weak instruments based on the maximum IV estimator bias, or the maximum Wald test size distortion, when there are multiple endogenous regressors. We tabulate critical values that enable using the first-stage F-statistic (or, when there are multiple endogenous regressors, the Cragg-Donald (1993) statistic) to test whether given instruments are weak. A technical contribution is to justify sequential asymptotic approximations for IV statistics with many weak instruments.
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This paper offers some econometric evidence on the sources of slow growth in Sub-Saharan Africa. The evidence suggests that the continent's slow growth can be explained in an international cross-country framework, without the need to invoke a special explanation unique to Sub-Saharan Africa. We find that poor economic policies have played an especially important role in the slow growth, most importantly Africa's lack of openness to international markets. In addition, geographical factors such as lack of access to the sea and tropical climate have also contributed to Africa's slow growth.
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This paper develops asymptotic distribution theory for instrumental variables regression when the partial correlations between the instruments and the endogenous variables are weak, here modeled as local to zero. Asymptotic representation are provided for various statistics, including two-stage least squares and limited information maximum likelihood estimators, Wald statistics, and statistics testing overidentification and endogeneity. The asymptotic distributions provide good approximations to sampling distributions with ten-twenty observations per instrument. The theory suggests concrete guidelines for applied work, including using nonstandard methods for construction of confidence regions. These results are used to interpret J. D. Angrist and A. B. Krueger's (1991) estimates of the returns to education.
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Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner's influential works on the resource curse. Our main hypothesis - that institutions are decisive for the resource curse - is confirmed. Our results contrast the claims of Sachs and Warner that institutions do not play a role. Copyright 2006 Royal Economic Society.
Article
Analyses the effects on resource allocation, factoral income distribution and the real exchange rate of a boom in one part of the country's traded goods sector. In the simplest of the models considered, which assumed that only labour was mobile between sectors, de-industrialisation was shown to follow a fall in manufacturing output and employment, a worsening of the balance of trade in manufacturing and a fall in the real return to factors specific to the manufacturing sector. Furthermore, it was shown the boom gives rise to a real appreciation, i.e. a rise in the relative price of non-traded relative to traded goods. However, in later models, which allowed for intersectoral mobility of more than one factor, it was shown that some of these outcomes could be reversed.-from Authors
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In this paper, we examine the impact of the coal boom in the 1970s and the subsequent coal bust in the 1980s on local labour markets in Kentucky, Ohio, Pennsylvania, and West Virginia. We address two main questions in our analysis. How were non-mining sectors affected by the shocks to the mining sector? How did these effects differ between sectors producing local goods and those producing traded goods? We find evidence of modest employment spillovers into sectors with locally traded goods but not into sectors with nationally traded goods. Copyright 2005 Royal Economic Society.
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This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
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A simple application of big-push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries. In this paper we present evidence from seven Latin American countries that natural resource booms are sometimes accompanied by declining per-capita GDP. We present a model with natural resources, increasing returns in the spirit of big push models, and expectations to clarify some of the reasons this may happen.
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An imperfect competition model for the Japanese rice market is developed to examine the impact of the current supply control policy used in Japan. The model simulates farm revenues with and without the current Acreage Reduction Program (ARP). The results indicate that the current ARP enhances farmers' revenue by 600 to 1,000 billion yen compared with the no supply control policy. Consequently, contrary to popular negative opinion regarding the ARP, rice farmers are benefiting from the current ARP. The market impacts of a loan rate system without the ARP are also investigated. The results indicate that if farmers' marketing organizations have some market power to restrict sales through diverting sales to the government, then a loan rate system would result in a relatively high price for farmers accompanied by modest government costs. � 1998 John Wiley & Sons, Inc.