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Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America

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  • Hunt Allcott
  • Daniel Keniston

Abstract

Do natural resources benefit producer economies, or is there a “Natural Resource Curse”, perhaps as the crowd-out of manufacturing productivity spillovers reduces long-term growth? We combine new data on oil and gas endowments with Census of Manufactures microdata to estimate how oil and gas booms affect local economies in the U.S. Local wages rise during oil and gas booms, but manufacturing is not crowded out—in fact, the sector grows overall, driven by upstream and locally-traded subsectors. Tradable manufacturing subsectors do contract during resource booms, but their productivity is unaffected, so there is no evidence of foregone local learning-by-doing effects. Over the full 1969–2014 sample, a county with one standard deviation additional oil and gas endowment averaged about 1% higher real wages. Overall, the results provide evidence against a Natural Resource Curse within the U.S.

Suggested Citation

  • Hunt Allcott & Daniel Keniston, 2018. "Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 695-731.
    • Handle: RePEc:oup:restud:v:85:y:2018:i:2:p:695-731.
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    File URL: http://hdl.handle.net/10.1093/restud/rdx042
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    More about this item

    Keywords

    Dutch Disease; Agglomeration; Natural resource booms; Local economic shocks;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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