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Spatial diffusion of local economic shocks in social networks: evidence from the US fracking boom

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  • Diemer, Andreas

Abstract

There is little evidence on the relevance of social networks in the aggregate spatial diffusion of localised economic shocks. This paper uses novel data on the universe of online friendships in the US to uncover how plausibly exogenous surges in the local demand for jobs in the oil and gas industry can affect the economy of spatially distant but socially proximate places. Although most of the diffusion is limited to geographically proximate areas, social networks matter too. According to 2SLS estimates, a million dollar per capita increase in oil and gas extraction raises per capita wages by over 5,000 dollars for workers reporting their incomes in counties located as far as 1,200 km away from the drilling site, but strongly socially connected to it. This effect is likely explained by the relocation of transient workers within the industry, providing new aggregate evidence in support of the literature on job information networks.

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  • Diemer, Andreas, 2020. "Spatial diffusion of local economic shocks in social networks: evidence from the US fracking boom," LSE Research Online Documents on Economics 105868, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:105868
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    File URL: http://eprints.lse.ac.uk/105868/
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    Cited by:

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    2. Wilson, Riley, 2022. "The Isolated States of America: Home State Bias, State Identity, and the Impact of State Borders on Mobility," IZA Discussion Papers 15193, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    social networks; fracking; spatial diffusion; job search;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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