IDEAS home Printed from https://ideas.repec.org/a/wly/jpamgt/v35y2016i3p587-614.html
   My bibliography  Save this article

Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property

Author

Listed:
  • Jeremy G. Weber
  • J. Wesley Burnett
  • Irene M. Xiarchos

Abstract

We study the effects of the property tax base shock caused by natural gas drilling in the Barnett Shale in Texas—a state that taxes oil and gas wells as property. Over the boom and bust in drilling, housing appreciation closely followed the oil and gas property tax base, which expanded the total tax base by 23 percent at its height. The expansion led to a decline in property tax rates while maintaining or increasing revenues to schools. Overall, each $1 per student increase in the oil and gas property tax base increased the value of the typical home by $0.15. Some evidence suggests that the cumulative density of wells nearby may lower housing values, indicating that drilling could reduce local welfare without policies to increase local public revenues.

Suggested Citation

  • Jeremy G. Weber & J. Wesley Burnett & Irene M. Xiarchos, 2016. "Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(3), pages 587-614, June.
  • Handle: RePEc:wly:jpamgt:v:35:y:2016:i:3:p:587-614
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/pam.21911
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2009. "Dealing with limited overlap in estimation of average treatment effects," Biometrika, Biometrika Trust, vol. 96(1), pages 187-199.
    2. Barrow, Lisa & Rouse, Cecilia Elena, 2004. "Using market valuation to assess public school spending," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1747-1769, August.
    3. Dan Black & Terra McKinnish & Seth Sanders, 2005. "The Economic Impact Of The Coal Boom And Bust," Economic Journal, Royal Economic Society, vol. 115(503), pages 449-476, April.
    4. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
    5. Joshua D. Angrist & Adriana D. Kugler, 2008. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 191-215, May.
    6. Weber, Jeremy G. & Hitaj, Claudia, 2015. "What Can We Learn about Shale Gas Development from Land Values? Opportunities, Challenges, and Evidence from Texas and Pennsylvania," Agricultural and Resource Economics Review, Cambridge University Press, vol. 44(2), pages 40-58, August.
    7. Dan A. Black & Terra G. McKinnish & Seth G. Sanders, 2005. "Tight Labor Markets and the Demand for Education: Evidence from the Coal Boom and Bust," ILR Review, Cornell University, ILR School, vol. 59(1), pages 3-16, October.
    8. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2015. "The Housing Market Impacts of Shale Gas Development," American Economic Review, American Economic Association, vol. 105(12), pages 3633-3659, December.
    9. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    10. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2012. "Shale Gas Development and Property Values: Differences across Drinking Water Sources," NBER Working Papers 18390, National Bureau of Economic Research, Inc.
    11. Boslett, Andrew & Guilfoos, Todd & Lang, Corey, 2016. "Valuation of expectations: A hedonic study of shale gas development and New York’s moratorium," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 14-30.
    12. Nicholas J. Sanders, 2012. "Toxic Assets: How the Housing Market Responds to Environmental Information Shocks," Working Papers 128, Department of Economics, College of William and Mary.
    13. Weber, Jeremy G., 2014. "A decade of natural gas development: The makings of a resource curse?," Resource and Energy Economics, Elsevier, vol. 37(C), pages 168-183.
    14. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
    15. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, April.
    16. Huang, Haifang & Tang, Yao, 2012. "Residential land use regulation and the US housing price cycle between 2000 and 2009," Journal of Urban Economics, Elsevier, vol. 71(1), pages 93-99.
    17. Guy Michaels, 2011. "The Long Term Consequences of Resource‐Based Specialisation," Economic Journal, Royal Economic Society, vol. 121(551), pages 31-57, March.
    18. Hill, Elaine L., 2012. "Unconventional Natural Gas Development and Infant Health: Evidence from Pennsylvania," Working Papers 128815, Cornell University, Department of Applied Economics and Management.
    19. Marchand, Joseph & Weber, Jeremy, 2015. "The Labor Market and School Finance Effects of the Texas Shale Boom on Teacher Quality and Student Achievement," Working Papers 2015-15, University of Alberta, Department of Economics.
    20. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    21. Marie-Estelle Binet, 2013. "The Linear Expenditure System and the Demand for Municipal Public Services: The Median Voter Specification Revisited," Urban Studies, Urban Studies Journal Limited, vol. 50(9), pages 1689-1703, July.
    22. Guerrieri, Veronica & Hartley, Daniel & Hurst, Erik, 2013. "Endogenous gentrification and housing price dynamics," Journal of Public Economics, Elsevier, vol. 100(C), pages 45-60.
    23. Brown, Jason P. & Fitzgerald, Timothy & Weber, Jeremy G., 2016. "Capturing rents from natural resource abundance: Private royalties from U.S. onshore oil & gas production," Resource and Energy Economics, Elsevier, vol. 46(C), pages 23-38.
    24. Wenhua Di & Jielai Ma & James C. Murdoch, 2010. "An analysis of the neighborhood impacts of a mortgage assistance program: A spatial hedonic model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(4), pages 682-697.
    25. Marchand, Joseph, 2012. "Local labor market impacts of energy boom-bust-boom in Western Canada," Journal of Urban Economics, Elsevier, vol. 71(1), pages 165-174.
    26. Wassmer, Robert W., 1993. "Property Taxation, Property Base, and Property Value: An Empirical Test of the 'New View'," National Tax Journal, National Tax Association, vol. 46(2), pages 135-59, June.
    27. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    28. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-238, January.
    29. Grant D. Jacobsen & Dominic P. Parker, 2016. "The Economic Aftermath of Resource Booms: Evidence from Boomtowns in the American West," Economic Journal, Royal Economic Society, vol. 126(593), pages 1092-1128, June.
    30. Popkin, Jennifer H. & Duke, Joshua M. & Borchers, Allison M. & Ilvento, Thomas, 2013. "Social costs from proximity to hydraulic fracturing in New York State," Energy Policy, Elsevier, vol. 62(C), pages 62-69.
    31. Jason Brown, 2014. "Production of natural gas from shale in local economies: a resource blessing or curse?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 1-29.
    32. Weber, Jeremy G., 2012. "The effects of a natural gas boom on employment and income in Colorado, Texas, and Wyoming," Energy Economics, Elsevier, vol. 34(5), pages 1580-1588.
    33. Kenneth A. Couch & Robert Bifulco, 2012. "Can Nonexperimental Estimates Replicate Estimates Based on Random Assignment in Evaluations of School Choice? A Within‐Study Comparison," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(3), pages 729-751, June.
    34. Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.
    35. Bradbury, Katharine L. & Mayer, Christopher J. & Case, Karl E., 2001. "Property tax limits, local fiscal behavior, and property values: evidence from Massachusetts under Proposition," Journal of Public Economics, Elsevier, vol. 80(2), pages 287-311, May.
    36. Richard G. Newell & Daniel Raimi, 2015. "Oil and Gas Revenue Allocation to Local Governments in Eight States," NBER Working Papers 21615, National Bureau of Economic Research, Inc.
    37. Ho, Daniel E. & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2007. "Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference," Political Analysis, Cambridge University Press, vol. 15(3), pages 199-236, July.
    38. Edel, Matthew & Sclar, Elliott, 1974. "Taxes, Spending, and Property Values: Supply Adjustment in a Tiebout-Oates Model," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 941-954, Sept./Oct.
    39. Paul N. Courant & Susanna Loeb, 1997. "Centralization of school finance in Michigan," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 114-136.
    40. Rahm, Dianne, 2011. "Regulating hydraulic fracturing in shale gas plays: The case of Texas," Energy Policy, Elsevier, vol. 39(5), pages 2974-2981, May.
    41. Anna M Santiago & George C Galster & Peter Tatian, 2001. "Assessing the property value impacts of the dispersed subsidy housing program in Denver," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(1), pages 65-88.
    42. Lang, Kevin & Jian, Tianlun, 2004. "Property taxes and property values: evidence from Proposition," Journal of Urban Economics, Elsevier, vol. 55(3), pages 439-457, May.
    43. Wassmer, Robert W., 1993. "Property Taxation, Property Base, and Property Value: An Empirical Test of the 'New View'," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 135-159, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bonilla Mejía, Leonardo, 2020. "Mining and human capital accumulation: Evidence from the Colombian gold rush," Journal of Development Economics, Elsevier, vol. 145(C).
    2. Hitaj, Claudia & Weber, Jeremy & Erickson, Ken, 2018. "Ownership of Oil and Gas Rights: Implications for U.S. Farm Income and Wealth," Economic Information Bulletin 276228, United States Department of Agriculture, Economic Research Service.
    3. Boslett, Andrew & Hill, Elaine & Ma, Lala & Zhang, Lujia, 2021. "Rural light pollution from shale gas development and associated sleep and subjective well-being," Resource and Energy Economics, Elsevier, vol. 64(C).
    4. Katie Jo Black & Shawn J. McCoy & Jeremy G. Weber, 2018. "When Externalities Are Taxed: The Effects and Incidence of Pennsylvania’s Impact Fee on Shale Gas Wells," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 107-153.
    5. Jason Brown, 2017. "Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts," Research Working Paper RWP 17-5, Federal Reserve Bank of Kansas City.
    6. Jason P. Brown & Timothy Fitzgerald & Jeremy G. Weber, 2019. "Does Resource Ownership Matter? Oil and Gas Royalties and the Income Effect of Extraction," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1039-1064.
    7. Lang, Corey, 2018. "Assessing the efficiency of local open space provision," Journal of Public Economics, Elsevier, vol. 158(C), pages 12-24.
    8. Hoy, Kyle A. & Xiarchos, Irene M. & Kelsey, Timothy W. & Brasier, Kathryn J. & Glenna, Leland L., 2018. "Marcellus Shale Gas Development and Farming," Agricultural and Resource Economics Review, Cambridge University Press, vol. 47(3), pages 634-664, December.
    9. Joseph Marchand & Jeremy G. Weber, 2020. "How Local Economic Conditions Affect School Finances, Teacher Quality, and Student Achievement: Evidence from the Texas Shale Boom," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(1), pages 36-63, January.
    10. Backstrom, Jesse, 2019. "Strategic Reporting and the Effects of Water Use in Hydraulic Fracturing on Local Groundwater Levels in Texas," Center for Growth and Opportunity at Utah State University 307177, Center for Growth and Opportunity.
    11. Joseph Marchand & Jeremy Weber, 2018. "Local Labor Markets And Natural Resources: A Synthesis Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 469-490, April.
    12. Keeler, Zachary T. & Stephens, Heather M., 2020. "Valuing shale gas development in resource-dependent communities," Resources Policy, Elsevier, vol. 69(C).
    13. Brown, Jason P. & Coupal, Roger & Hitaj, Claudia & Kelsey, Timothy W. & Krannich, Richard S. & Xiarchos, Irene M., 2017. "New Dynamics in Fossil Fuel and Renewable Energy for Rural America," USDA Miscellaneous 260676, United States Department of Agriculture.
    14. Grant D. Jacobsen, 2019. "Who Wins In An Energy Boom? Evidence From Wage Rates And Housing," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 9-32, January.
    15. Marchand, Joseph & Weber, Jeremy, 2017. "The Local Effects of the Texas Shale Boom on Schools, Students, and Teachers," Working Papers 2017-12, University of Alberta, Department of Economics, revised 31 Jan 2019.
    16. Hitaj, Claudia & Weber, Jeremy G. & Hopkins, Jeffrey W. & Erickson, Kenneth W., 2018. "Ownership of Oil and Gas Rights and Farm Sector Income and Wealth," 2018 Annual Meeting, August 5-7, Washington, D.C. 274316, Agricultural and Applied Economics Association.
    17. Harleman, Max & Weber, Jeremy G., 2017. "Natural resource ownership, financial gains, and governance: The case of unconventional gas development in the UK and the US," Energy Policy, Elsevier, vol. 111(C), pages 281-296.
    18. Gibbons, Stephen & Heblich, Stephan & Timmins, Christopher, 2021. "Market tremors: shale gas exploration, earthquakes, and their impact on house prices," LSE Research Online Documents on Economics 107900, London School of Economics and Political Science, LSE Library.
    19. Zuo, Na & Schieffer, Jack & Buck, Steven, 2019. "The effect of the oil and gas boom on schooling decisions in the U.S," Resource and Energy Economics, Elsevier, vol. 55(C), pages 1-23.
    20. Solarin, Sakiru Adebola, 2020. "The effects of shale oil production, capital and labour on economic growth in the United States: A maximum likelihood analysis of the resource curse hypothesis," Resources Policy, Elsevier, vol. 68(C).
    21. Gibbons, Stephen & Heblich, Stephan & Timmins, Christopher, 2021. "Market tremors: Shale gas exploration, earthquakes, and their impact on house prices," Journal of Urban Economics, Elsevier, vol. 122(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joseph Marchand & Jeremy Weber, 2018. "Local Labor Markets And Natural Resources: A Synthesis Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 469-490, April.
    2. Grant D. Jacobsen, 2019. "Who Wins In An Energy Boom? Evidence From Wage Rates And Housing," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 9-32, January.
    3. Jason P. Brown & Timothy Fitzgerald & Jeremy G. Weber, 2019. "Does Resource Ownership Matter? Oil and Gas Royalties and the Income Effect of Extraction," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1039-1064.
    4. Timothy W. Kelsey & Mark D. Partridge & Nancy E. White, 2016. "Unconventional Gas and Oil Development in the United States: Economic Experience and Policy Issues," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(2), pages 191-214.
    5. Tsvetkova, Alexandra & Partridge, Mark D., 2016. "Economics of modern energy boomtowns: Do oil and gas shocks differ from shocks in the rest of the economy?," Energy Economics, Elsevier, vol. 59(C), pages 81-95.
    6. Timothy M. Komarek, 2018. "Crime and natural resource booms: evidence from unconventional natural gas production," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 113-137, July.
    7. Guettabi, Mouhcine & James, Alexander, 2020. "Who benefits from an oil boom? Evidence from a unique Alaskan data set," Resource and Energy Economics, Elsevier, vol. 62(C).
    8. Weber, Jeremy G. & Hitaj, Claudia, 2015. "What Can We Learn about Shale Gas Development from Land Values? Opportunities, Challenges, and Evidence from Texas and Pennsylvania," Agricultural and Resource Economics Review, Cambridge University Press, vol. 44(2), pages 40-58, August.
    9. Betz, Michael R. & Partridge, Mark D. & Farren, Michael & Lobao, Linda, 2015. "Coal mining, economic development, and the natural resources curse," Energy Economics, Elsevier, vol. 50(C), pages 105-116.
    10. Weinstein, Amanda L. & Partridge, Mark D. & Tsvetkova, Alexandra, 2018. "Follow the money: Aggregate, sectoral and spatial effects of an energy boom on local earnings," Resources Policy, Elsevier, vol. 55(C), pages 196-209.
    11. Fleming, David & Komarek, Timothy & Partridge, Mark & Measham, Thomas, 2015. "The Booming Socioeconomic Impacts of Shale: A Review of Findings and Methods in the Empirical Literature," MPRA Paper 68487, University Library of Munich, Germany.
    12. Marchand, Joseph & Weber, Jeremy, 2017. "The Local Effects of the Texas Shale Boom on Schools, Students, and Teachers," Working Papers 2017-12, University of Alberta, Department of Economics, revised 31 Jan 2019.
    13. Komarek, Timothy M., 2016. "Labor market dynamics and the unconventional natural gas boom: Evidence from the Marcellus region," Resource and Energy Economics, Elsevier, vol. 45(C), pages 1-17.
    14. Zuo, Na & Schieffer, Jack & Buck, Steven, 2019. "The effect of the oil and gas boom on schooling decisions in the U.S," Resource and Energy Economics, Elsevier, vol. 55(C), pages 1-23.
    15. Paul Pelzl & Steven (S.) Poelhekke, 2018. "Good mine, bad mine: Natural resource heterogeneity and Dutch disease in Indonesia," Tinbergen Institute Discussion Papers 18-073/VIII, Tinbergen Institute.
    16. Munasib, Abdul & Rickman, Dan S., 2015. "Regional economic impacts of the shale gas and tight oil boom: A synthetic control analysis," Regional Science and Urban Economics, Elsevier, vol. 50(C), pages 1-17.
    17. Weinstein, Amanda & Partridge, Mark & Tsvetkova, Alexandra, 2017. "Follow the Money: How Does the Income Flow After an Energy Boom," MPRA Paper 77336, University Library of Munich, Germany.
    18. Rickman, Dan & Wang, Hongbo, 2020. "What goes up must come down? The recent economic cycles of the four most oil and gas dominated states in the US," Energy Economics, Elsevier, vol. 86(C).
    19. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    20. Kevin Berry & Alexander James & Brock Smith & Brett Watson, 2019. "Geography, Geology, and Regional Economic Development," Working Papers 2019-03, University of Alaska Anchorage, Department of Economics.

    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jpamgt:v:35:y:2016:i:3:p:587-614. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www3.interscience.wiley.com/journal/34787/home .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/journal/34787/home .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.