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Fracking Growth

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  • Thiemo Fetzer

Abstract

This paper estimates the effect of the shale oil and gas boom in the United States on local economic outcomes. The main source of exogenous variation to be explored is the location of previously unexplored shale deposits. These have become technologically recoverable through the use of hydraulic fracturing and horizontal drilling. I use this to estimate the localised effects from resource extraction. Every oil- and gas sector job creates about 2.17 other jobs. Personal incomes increase by 8% in counties with at least one unconventional oil or gas well. The resource boom translates into an overall increase in employment by between 500,000 - 600,000 jobs. A key observation is that, despite rising labour costs, there is no Dutch disease contraction in the tradable goods sector, while the non-tradable goods sector contracts. I reconcile this finding by providing evidence that the resource boom may give rise to local comparative advantage, through locally lower energy cost. This allows a clean separation of the energy price effect distinct from the local resource extraction effects.

Suggested Citation

  • Thiemo Fetzer, 2014. "Fracking Growth," CEP Discussion Papers dp1278, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1278
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    Citations

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    Cited by:

    1. Peter Maniloff & Ralph Mastromonaco, 2014. "The Local Economic Impacts of Hydraulic Fracturing and Determinants of Dutch Disease," Working Papers 2014-08, Colorado School of Mines, Division of Economics and Business.
    2. repec:eee:inecon:v:107:y:2017:i:c:p:34-59 is not listed on IDEAS
    3. Melissa S. Kearney & Riley Wilson, 2017. "Male Earnings, Marriageable Men, and Nonmarital Fertility: Evidence from the Fracking Boom," NBER Working Papers 23408, National Bureau of Economic Research, Inc.
    4. Stephan E. Maurer & Andrei V. Potlogea, 2017. "Male-biased Demand Shocks and Women’s Labor Force Participation: Evidence from Large Oil Field Discoveries," Working Paper Series of the Department of Economics, University of Konstanz 2017-08, Department of Economics, University of Konstanz.
    5. Maurer, Stephan E. & Potlogea, Andrei, 2014. "Fueling the gender gap? Oil and women's labor and marriage market outcomes," LSE Research Online Documents on Economics 60351, London School of Economics and Political Science, LSE Library.
    6. Agerton, Mark & Hartley, Peter R. & Medlock, Kenneth B. & Temzelides, Ted, 2017. "Employment impacts of upstream oil and gas investment in the United States," Energy Economics, Elsevier, vol. 62(C), pages 171-180.
    7. Arezki, Rabah & Fetzer, Thiemo & Pisch, Frank, 2017. "On the comparative advantage of U.S. manufacturing: Evidence from the shale gas revolution," Journal of International Economics, Elsevier, vol. 107(C), pages 34-59.
    8. Brown, Jason & Fitzgerald, Timothy & Weber, Jeremy G., 2016. "Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties," Research Working Paper RWP 16-12, Federal Reserve Bank of Kansas City.
    9. 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.
    10. 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.
    11. 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.
    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 26 Jan 2018.
    13. Grant Jacobsen, 2016. "Who Wins in an Energy Boom? Evidence from Wage Rates and Housing," Upjohn Working Papers and Journal Articles 17-271, W.E. Upjohn Institute for Employment Research.
    14. 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.
    15. 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.
    16. repec:cep:cepdps:dp1399 is not listed on IDEAS
    17. Lee, Jim, 2015. "The regional economic impact of oil and gas extraction in Texas," Energy Policy, Elsevier, vol. 87(C), pages 60-71.

    More about this item

    Keywords

    Resource boom; fracking; shale; spillovers; natural gas; energy prices;

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • N52 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: 1913-
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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