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On the comparative advantage of U.S. manufacturing: Evidence from the shale gas revolution

Author

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  • Pisch, Frank
  • Fetzer, Thiemo
  • Arezki, Rabah

Abstract

This paper provides novel empirical evidence of the effects of a plausibly exogenous change in relative factor prices on United States manufacturing production and trade. The shale gas revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world reflecting differences in endowment of difficult-to-trade natural gas. Guided by economic theory, empirical tests on output, factor reallocation and international trade are conducted. Results show that U.S. manufacturing exports have grown by about 10 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins
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Suggested Citation

  • Pisch, Frank & Fetzer, Thiemo & Arezki, Rabah, 2017. "On the comparative advantage of U.S. manufacturing: Evidence from the shale gas revolution," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 135678, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:135678
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/135678/
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    Cited by:

    1. Julien Xavier Daubanes & Fanny Henriet & Katheline Schubert, 2021. "Unilateral CO2 Reduction Policy with More Than One Carbon Energy Source," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(3), pages 543-575.
    2. Wang, Qiang & Li, Shuyu & Li, Rongrong & Ma, Minglu, 2018. "Forecasting U.S. shale gas monthly production using a hybrid ARIMA and metabolic nonlinear grey model," Energy, Elsevier, vol. 160(C), pages 378-387.
    3. Jaimes, Richard & Gerlagh, Reyer, 2020. "Resource-richness and economic growth in contemporary U.S," Energy Economics, Elsevier, vol. 89(C).
    4. Ferriani, Fabrizio & Gazzani, Andrea, 2023. "The invasion of Ukraine and the energy crisis: Comparative advantages in equity valuations," Finance Research Letters, Elsevier, vol. 58(PD).
    5. Meier, Felix D. & Quaas, Martin F., 2021. "Booming gas – A theory of endogenous technological change in resource extraction," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    6. Ron H. Chan & Edward Manderson & Fan Zhang, 2022. "Indirect Energy Costs and Comparative Advantage," Economics Discussion Paper Series 2206, Economics, The University of Manchester.
    7. Yassine Kirat, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," Post-Print hal-03676616, HAL.
    8. Hanwei Huang & Jiandong Ju & Vivian Z. Yue, 2017. "Structural adjustments and international trade: theory and evidence from China," CEP Discussion Papers dp1508, Centre for Economic Performance, LSE.
    9. Saussay, Aurélien & Sato, Misato, 2024. "The impact of energy prices on industrial investment location: Evidence from global firm level data," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    10. Manderson, Edward J. & Kneller, Richard, 2020. "Energy endowments and the location of manufacturing firms," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    11. Antonia Kurz & Stela Rubínová, 2025. "Trade Effects of Direct and Indirect Carbon Pricing Policies," Discussion Papers of DIW Berlin 2121, DIW Berlin, German Institute for Economic Research.
    12. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    13. Nida Cakir Melek & Michael Plante & Mine Yucel, 2021. "Resource Booms and the Macroeconomy: The Case of U.S. Shale Oil," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 307-332, October.
    14. Dussaux, Damien & Monjon, Stéphanie, 2023. "Selling under other skies when energy prices skyrocket: How do the companies adapt their export strategy when energy prices rise?," Energy Policy, Elsevier, vol. 183(C).
    15. Kurz, Antonia & Rubínová, Stela, 2024. "Trade effects of carbon pricing policies," WTO Staff Working Papers ERSD-2024-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Kirat, Yassine, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," International Economics, Elsevier, vol. 167(C), pages 59-77.
    17. Eife, Thomas, 2020. "The General Equilibrium Effects of the Shale Revolution," Working Papers 0694, University of Heidelberg, Department of Economics.
    18. Reinhard Ellwanger & Hinnerk Gnutzmann & Piotr Śpiewanowski, 2025. "Cost Pass‐Through in Commodity Markets With Capacity Constraints and International Linkages," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(2), pages 149-163, March.
    19. Bajo-Buenestado, Raúl, 2018. "Relationship-specificity, incomplete contracts, and the pattern of trade: A comment on the role of natural resources," Energy Economics, Elsevier, vol. 75(C), pages 410-422.
    20. Wang, Shuhong & Li, Weiyao & Zhang, Ying & Song, Malin & Chen, Xueli & Cui, Lianbiao, 2024. "The impact of a natural resource protection policy on economic development: Based on a policy evaluation of China’s coal resource tax reform," Energy Policy, Elsevier, vol. 192(C).

    More about this item

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • N52 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: 1913-
    • 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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