New Research: Labor market dynamics and the unconventional natural gas boom: Evidence from the Marcellus region

Timothy M. Komarek ([sites.google.com], Old Dominion University) writes on

Labor market dynamics and the unconventional natural gas boom: Evidence from the Marcellus region

Abstract

The energy extraction boom of the mid 2000s impacted local economies in areas with substantial shale oil and gas reserves. I examine the impact of the energy boom on the labor market by exploiting a natural experiment in the Marcellus region. In particular, I compare counties with fracking activity in Pennsylvania, Ohio and West Virginia to the control group of counties in New York, which imposed a moratorium and later ban on fracking. I look at how the benefits to the labor demand shock are shared between industries as well as how employment and wages in related industries adjust over the course of the resource boom. The results suggest total employment and wages per job increase by 7% and 11% respectively above pre-boom levels in the three years after the boom, but decline after 4 years or more. The results also show significant positive spillovers to related sectors, such as construction, transportation, retail trade and accommodations. However, there is no evidence of the so called ‘resource curse’ crowding out employment or increasing wages in manufacturing.

Published in Resource and Energy Economics, Volume 45, August 2016, Pages 1–17, available here [sciencedirect.com].

New OxCARRE Research Papers

Rabah Arezki [imf.org], Patrick Bolton [columbia.edu], Sanjay Peters [columbia.edu, Copenhagen Business School], Frederic Samama (Amundi Asset Management) & Joseph Stiglitz [columbia.edu, Columbia University] write on

From Global Savings Glut to Financing Infrastructure: The Advent of Investment Platforms

Abstract

This paper investigates the emerging global landscape for public-private coinvestments in infrastructure. The creation of the Asian Infrastructure Investment Bank and other so-called “infrastructure investment platforms” are an attempt to tap into the pool of both public and private long-term savings in order to channel the latter into much needed infrastructure projects. This paper puts these new initiatives into perspective by critically reviewing the literature and experience with public private partnerships in infrastructure. It concludes by identifying the main challenges policy makers and other actors will need to confront going forward and to turn infrastructure into an asset class of its own.

Full paper at OxCARRE website here [pdf, oxcarre.ox.ac.uk].


and


Rabah Arezki [imf.org] and Thiemo Fetzer [University of Warwick trfetzer.com] write on


On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution

This paper provides the first empirical evidence of the newly found comparative advantage of the United States manufacturing sector following the so-called shale gas revolution. The 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 owing to the physics of natural gas. Results show that U.S. manufacturing exports have grown by about 6 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.

Full paper at OxCARRE website here [pdf, oxcarre.ox.ac.uk].

World Energy Outlook cautiously optimistic on shift to low carbon future

The International Energy Agency issued its World Energy Outlook [worldenergyoutlook.org]. It's heavy on the connection between energy demand and climate change and aims to give some projections on short and long term developments.
Some interesting quotes from the Executive Summary [iea.org]:

There was also a tantalising hint in the 2014 data of a de-coupling in the relationship between CO2 emissions and economic activity, until now a very predictable link.

By 2040, Asia is projected to account for four out of every five tonnes of coal consumed globally, (...). However, its continued use around the world is compatible with stringent environmental policies only if it is used in the most efficient way, with advanced control technologies to reduce air pollution, and if progress is made in demonstrating that CO2 can be safely and cost-effectively captured and stored.

Despite the shift in policy intentions catalysed by COP21, more is needed to avoid the
worst effects of climate change. There are unmistakeable signs that the much-needed
global energy transition is underway, but not yet at a pace that leads to a lasting reversal 10 of the trend of rising CO2 emissions.

New Research: Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

Alexandra Tsvetkova [ideas.repec.org] and Mark Partridge [osu.edu], both from Ohio State University, write on

Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

abstract:

The U.S. shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance. Research has produced mixed results and has not compared how energy shocks differ from equal-sized shocks elsewhere in the economy. What emerges is that the estimated impacts of energy development vary by region, empirical methodology, as well as the time horizon that is considered. This paper captures these dimensions to present a more complete picture of energy boomtowns. Utilizing U.S. county data, we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector. We compare this to the effects of equal-sized shocks in the rest of the economy to assess whether energy booms are inherently different. The analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables. We difference over 1-, 3-, 6-, and 10- year time periods to account for county fixed effects and to assess responses across different time horizons. The results show that in nonmetro counties, energy sector multiplier effects on total county employment first increase up to 6-year horizons and then decline for 10-year horizons. In metro counties, 1-year differences analysis suggests crowding out though the multipliers are insignificant in longer horizons. We also observe positive spillovers to the nontraded goods sector, while spillovers are small or negative for traded goods. Yet, equal-sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks, suggesting that policymakers should seek more diversified development.

Paper available here [pdf, uni-muenchen.de] 

The Economist features low oil price, shale gas and the competition from the Middle East

This week's Economist opens with a leader on the dynamics surrounding the oil price, shale oil/gas production in the US and the conventional production in the Middle East. With more analysis further in (here and here).

Everybody loves SWF

FT's Gillian Tett comments [FT.com] on the sudden popularity of Sovereign Wealth Fund constructs, including among western countries. She notes in particular that the UK Treasurer Osborne announced to set up one in his autumn statement [FT.com]:

we’re announcing a new Sovereign Wealth Fund for the North of England so that the shale gas resources of the North are used to invest in the future of the North.

The revenues of shale gas are for now still largely illusionary. The question why the UK didn't set up a SWF for for their real revenues from the North sea was discussed in the Guardian [oxcarre.blogspot.com] not too long ago. On the OxCARRE [oxcarre.ox.ac.uk] website you'll find further research on Sovereign Wealth Funds and optimal savings of commodity export revenues.