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Follow the Money: How Does the Income Flow After an Energy Boom

Weinstein, Amanda and Partridge, Mark and Tsvetkova, Alexandra (2017): Follow the Money: How Does the Income Flow After an Energy Boom.

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Abstract

Many U.S. towns reportedly boomed after new technologies in oil and gas extraction, particularly improved hydraulic fracturing, led to rapid development of shale resources. Recent research on the expected economic impact focused on the employment multipliers associated with new oil and gas jobs. Instead, our focus is the impact of oil and gas industry growth on local earnings while paying attention to the distributional effects and assessing how much income seeps out due to the peculiarities of the industry. Our estimation results suggest that oil and gas earnings multipliers are relatively modest and mostly similar to oil and gas employment multipliers, with relatively large shares of the earnings leaving the county on average. Likewise, oil and gas multipliers tend to be smaller or comparable to the estimated multipliers for equal-sized shocks in the rest of the economy, suggesting that oil and gas is not a special industry case. Given the high wages in the sector and the large royalty payments that can go to landowners, these results may be surprising.

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