The Labor Market Worsening Effects of a Resource Bust: Evidence from the Crude Oil Price Shock in Ecuador

Sergio Parra-Cely () and Wladimir Zanoni

World Development, 2024, vol. 183, issue C

Abstract: To evaluate the effects of a negative oil price shock on individual labor market outcomes, we leverage the interaction of exogenous changes in global oil prices with predetermined geographical variation in oil dependency across Ecuadorian cantons. Difference-in-differences estimates show a significant decline in wages and non-labor earnings, moderate adjustments in working hours, but no impact on labor market participation following the resource bust. Decreased labor demand from public and private sectors in oil-producing areas, along with increased exposure of informal workers to oil-price volatility, serve as the main mechanisms explaining our findings. While we observe occupational sorting, we cannot exclude the possibility of homogeneous effects across socio-demographic groups, nor the existence of industry and geographic spillover effects.

Keywords: Resource bust; Wages; Employment; Oil; Difference-in-differences; Ecuador (search for similar items in EconPapers)
JEL-codes: H41 H75 I31 (search for similar items in EconPapers)
Date: 2024
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Working Paper: The Labor Market Worsening Effects of a Resource Bust: Evidence from the Crude Oil Price Shock in Ecuador (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:183:y:2024:i:c:s0305750x24002006

DOI: 10.1016/j.worlddev.2024.106730

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