Fracking Growth

This is a map depicting the location of Unconvential Shale Oil and Gas Wells Across the US as of 2012

This paper estimates the effect of the recent shale oil and shale gas boom in the United States on economic outcomes at the county level. In particular I provide a tentative answer why there may be no Dutch Disease in the manufacturing sector, despite rising labour costs. I show that resource extraction is a source of comparative advantage, as places with resource extraction benefit from significantly lower energy prices. These lower local energy prices are driven by transport network capacity constraints, which limit the ability for markets to arbitrage away price differences.

Read the whole paper Fracking Growth here.

INTERACTIVE SHALE ECONOMIC IMPACT EXLPLORER MAP

shale-impact-explorer

The shale boom induced a significant expansion in mining sector employment, which spills into other local industries, such as service sectors, construction and retail trade. Local wages increase significantly, however, there is no crowding out of the tradable goods producing sectors. This finding is explained by significantly lower energy prices. Resource extraction is a source of comparative advantage in form of significantly lower energy costs. The possibilities for arbitrage are limited in the short –run due to infrastructure capacity constraints.

  • Counties where shale resources are being extracted have seen increases in average incomes, jobs and wages ranging between 10% and 20%.
  • Unemployment rates in fracking counties are 2.4 percentage points lower than in the rest of the United States.
  • Each job created in the oil and gas sector generates anywhere between one and three jobs in other sectors.
  • Local natural prices have decreased dramatically by around 24%, helping the energy intensive manufacturing sectors to expand despite significant increases in local labour cost.

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