Event Recap: Labor Market Restructuring in Shale Booms

Nov. 27, 2012

On Monday, November 26, 2012 AEDE welcomed Amanda Weinstein, AEDE PhD Candidate, to present her research titled “Labor Market Restructuring in Shale Booms” as part of the AEDE Seminar Series.

Weinstein’s research focuses on estimating the economic impact of shale development for states and regions that have adopted hydraulic fracturing methods and micro-seismic technology to extract natural gas and oil from underground shale plays. Weinstein’s research builds on existing research in the field, which has been conducted with varying results. In her work, Weinstein examines the boom cycle of shale development, modeled after similar work that looked at the boom and bust cycles for the coal industry in the US in the 1970s and 1980s. Early in her studies at AEDE she studied shale development impacts in Pennsylvania and Ohio; after much success in this area she has expanded her research to perform a more rigorous national analysis of the economic impact of shale development in shale plays across the US.

Using data from 2001 to 2011 acquired from the U.S. Economic Modeling Specialists International, Weinstein conducted a new variant of the difference-in-difference methodology to examine how the economies of counties across the US were affected by shale development over this timespan. This methodology enabled her to use a larger sample and incorporate better controls to detect differences in trends between boom counties and non-boom counties. As she notes in her research, this was the key to achieving a better counterfactual to determine the difference between what would have happened to these boom counties had there been no boom and what actually occurred. Her research method also provides insight into the labor market restructuring occurring due to shale booms and provides an understanding of the mechanisms behind the “natural resource curse” previously found at the county level in earlier studies.

In her analysis Weinstein found that there was a very sharp increase in oil and gas employment in boom counties starting around 2004. Around this time, growth rates in employment for boom and non-boom counties seemed to be diverging, and even more so for earnings. She found that boom counties were associated with an annualized increase in employment of 1.59 percent and an annual increase in earnings of 3 percent. Further, Weinstein found that boom counties experienced a 2.6 percent increase in employment during the first year of the boom, but this employment growth decreased by 0.62 percent each subsequent year. Her analysis also showed that the boom counties were experiencing a 6 percent increase in total earnings in the first year, however, that impact decreased by about 1.6 percent each subsequent year. Overall, the results suggest that 1 additional oil and gas worker is associated with 0.46 additional jobs; suggesting that the impact of shale development on employment is modest with an employment multiplier of only 1.46.

Weinstein hopes that her research will help policymakers to better understand the boom cycle of shale development to better plan for investment in this resource. As she notes, she hopes that a better understanding of the local labor market restructuring that occurs during a resource boom will allow policymakers to better understand the effects of this natural resource boom, which in turn will enable them to better understand and possibly avoid or limit the effects of the “resource curse.” Weinstein’s research has been featured in several news outlets, including the Columbus Dispatch and the Cleveland Plain Dealer.

To see Weinstein’s full presentation, please click here.

November 27, 2012