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Assessing the Income and Employment Effects of Shale Gas Extraction Windfalls: Evidence from the Marcellus Region

Paredes Dusan (), Komarek Timothy and Loveridge Scott
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Paredes Dusan: Universidad Católica del Norte
Komarek Timothy: Old Dominion University
Loveridge Scott: Michigan State University

No 49, Documentos de Trabajo en Economia y Ciencia Regional from Universidad Catolica del Norte, Chile, Department of Economics

Abstract: New technologies combining hydraulic fracturing and horizontal drilling in oil and gas extraction are creating a sudden expansion of production. Residents of places where deep underground oil and gas deposits are found want to know about the broader economic, social, and environmental impacts of these activities that generate windfall income for some residents. We first review the literature on windfall spending patterns. Then, using the Marcellus region, the earliest area to be tapped using the new techniques, we estimate county-level employment and income effects. For robustness, we employ two methods. Using a propensity score matching approach we find no effect of fracking on income or employment. A panel-fixed effects regression approach suggests statistically significant employment effects in six out of seven alternative specifications, but significant income effects in only one out of seven specifications. In short, the income spillover effects in the Marcellus region appear to be minimal, meaning there’s little incentive at the county level to incur current or potential future costs that may be associated with this activity. We conclude with some ideas on how localities might employ policies that would allow natural gas extraction to move forward, benefitting landowners, while establishing some financial safeguards for the broader community.

Keywords: Economic growth; Marcellus shale gas; resource extraction; propensity score matching; panel data; windfall (search for similar items in EconPapers)
JEL-codes: O13 R11 Q33 Q32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
Date: 2014-03, Revised 2014-03
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