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Where do jobs go when oil prices drop?

Ana María Herrera (), Mohamad Karaki () and Sandeep Kumar Rangaraju

Energy Economics, 2017, vol. 64, issue C, 469-482

Abstract: In this paper, we estimate a factor augmented vector autoregressive (FAVAR) model to investigate the effect of oil price shocks on total private job flows as well as on industry-level job creation and destruction. Following an unexpected oil price drop in the first year, we find that in oil and gas extraction and support activities for mining exhibit a reduction in job creation and an increase in job destruction. Instead, industries in construction, manufacturing and services exhibit an increase in the net employment change. An unexpected decline in the real oil price slows down the pace of gross job reallocation. We demonstrate that the increase (decrease) in private job destruction (creation) observed during the first year is primarily driven by the response of closing (expanding) firms in services and manufacturing.

Keywords: Oil prices; Job flows; Job reallocation (search for similar items in EconPapers)
JEL-codes: E24 E32 Q43 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.eneco.2016.02.006

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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