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Income and employment effects of shale gas extraction windfalls: Evidence from the Marcellus region

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  • Paredes, Dusan
  • Komarek, Timothy
  • Loveridge, Scott

Abstract

New technologies combining hydraulic fracturing and horizontal drilling in oil and gas extraction are creating a sudden expansion of production. Residents of places where deep underground oil and gas deposits are found want to know about the broader economic, social, and environmental impacts of these activities that generate windfall income for some residents. We first review the literature on windfall spending patterns. Then, using the Marcellus region, the earliest area to be tapped using the new techniques, we estimate county-level employment and income effects. For robustness, we employ two methods. Using a propensity score matching approach we find no effect of fracking on income or employment. A panel-fixed effect regression approach suggests statistically significant employment effects in six out of seven alternative specifications, but significant income effects in only one out of seven specifications. In short, the income spillover effects in the Marcellus region appear to be minimal, meaning there's little incentive at the county level to incur current or potential future costs that may be associated with this activity. We conclude with some ideas on how localities might employ policies that would allow natural gas extraction to move forward, benefitting landowners, while establishing some financial safeguards for the broader community.

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  • Paredes, Dusan & Komarek, Timothy & Loveridge, Scott, 2015. "Income and employment effects of shale gas extraction windfalls: Evidence from the Marcellus region," Energy Economics, Elsevier, vol. 47(C), pages 112-120.
  • Handle: RePEc:eee:eneeco:v:47:y:2015:i:c:p:112-120
    DOI: 10.1016/j.eneco.2014.09.025
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    More about this item

    Keywords

    Economic growth; Marcellus shale gas; Resource extraction; Propensity score matching; Panel data; Windfall;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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