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Fracking Growth

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.

To download the working paper click here.


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