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Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution

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  • James Feyrer
  • Erin T. Mansur
  • Bruce Sacerdote

Abstract

We track the geographic and temporal propagation of local economic shocks from new oil and gas production generated by hydrofracturing. Each million dollars of new production produces $80,000 in wage income and $132,000 in royalty and business income within a county. Within 100 miles, one million dollars of new production generates $257,000 in wages and $286,000 in royalty and business income. Roughly two-thirds of the wage income increase persists for two years. Assuming no general equilibrium effects, new extraction increased aggregate US employment by as many as 640,000, and decreased the unemployment rate by 0.43 during the Great Recession.

Suggested Citation

  • James Feyrer & Erin T. Mansur & Bruce Sacerdote, 2017. "Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution," American Economic Review, American Economic Association, vol. 107(4), pages 1313-1334, April.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:4:p:1313-34
    Note: DOI: 10.1257/aer.20151326
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    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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