Timothy J. Considine

Department of Economics
University of Wyoming
Laramie, WY 82071 USA
tconsidi@uwyo.edu

 STRATA WORKING PAPER

JEL: Q2, Q3, Q4
Released: October, 2017
Last Major Revisions: October 20, 2017

Abstract

This study examines why ex post econometric studies often find that the economic impacts of shale gas development are considerably smaller than those found by ex ante input-output (IO) studies.  Besides the obvious methodological differences, the econometric studies use proxies for shale development while IO approaches use monetary measures of investment and production. This paper unifies these two approaches with a measure of shale industry spending that includes the value of investments in new wells and the value of new natural gas output and natural gas liquids production. An econometric analysis is conducted using three data sets: monthly time series, annual county data, and quarterly time series. The monthly models find employment multipliers between 12 and 14 jobs per million dollars of shale spending, which is close to estimates using input-output models. A structural break in the employment multiplier is found corresponding with the adoption of horizontal drilling in 2007. The county panel data analysis finds employment multipliers between 4.8 and 6.6 and income multipliers between $1 and $1.2 thousand of personal income generated per million dollars of shale industry spending. Finally, the quarterly data are modeled using a vector autoregressive (VAR) model of value added, income, and employment. A dynamic VAR simulation finds that a $1 million shock in shale investment and production generates 16 jobs, $1.75 million in value added, and $3.0 million in total personal income after 18 months. These findings suggest that the economic impacts from shale energy investment and production may be greater than many previous ex post econometric studies have found.


 This paper is sponsored under a research contract with Strata Policy.  The analysis, findings, and conclusions in this paper are solely those of the author and are not necessarily those of the University of Wyoming or Strata Policy. Research assistance from Brian Isom, Adam Bahr, and Jake Cottle is gratefully acknowledged. Comments from Ben Gilbert, Brian Gilbert, and Michael Reed are also appreciated. The author accepts all responsibility for any remaining errors or omissions.