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Where do jobs go when oil prices drop?

Author

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  • Herrera, Ana María
  • Karaki, Mohamad B.
  • Rangaraju, Sandeep Kumar

Abstract

In this paper, we estimate a factor augmented vector autoregressive (FAVAR) model to investigate the effect of oil price shocks on total private job flows as well as on industry-level job creation and destruction. Following an unexpected oil price drop in the first year, we find that in oil and gas extraction and support activities for mining exhibit a reduction in job creation and an increase in job destruction. Instead, industries in construction, manufacturing and services exhibit an increase in the net employment change. An unexpected decline in the real oil price slows down the pace of gross job reallocation. We demonstrate that the increase (decrease) in private job destruction (creation) observed during the first year is primarily driven by the response of closing (expanding) firms in services and manufacturing.

Suggested Citation

  • Herrera, Ana María & Karaki, Mohamad B. & Rangaraju, Sandeep Kumar, 2017. "Where do jobs go when oil prices drop?," Energy Economics, Elsevier, vol. 64(C), pages 469-482.
    • Handle: RePEc:eee:eneeco:v:64:y:2017:i:c:p:469-482
    DOI: 10.1016/j.eneco.2016.02.006
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    More about this item

    Keywords

    Oil prices; Job flows; Job reallocation;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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