Content area
Full Text
The extraction of natural gas from shale and tight gas formations is one of the largest innovations in the U.S. energy sector in several decades. According to the Energy Information Agency's (EIA) 2013 Annual Energy Outlook, total U.S. recoverable natural gas resources were estimated to be 2,327 trillion cubic feet, up from 1,259 trillion cubic feet in 2000. Using projected annual growth in U.S. natural gas consumption, current U.S. reserves of natural gas represent an estimated 70 years' worth of supply. This energy boom has reversed a long downward trend in U.S. natural gas production. In the 1970s the U.S. energy sector seemingly conceded its decline and began investing in global markets to survive. That trend reversed course in the mid-2000s.
A key question is whether this now abundant and accessible natural resource has positive effects on local economic conditions. Some theories suggest resource abundance may increase local economic development through higher demand for labor in the energy sector and spillover spending in the local economy. Other theories, though, suggest industries not closely related to the resource extraction industry may be harmed as energy production expands. For example, labor demand by the extraction industry may be high enough to bid up local wages, which in turn could pull employees from other lower-paying jobs and make it difficult for other industries to survive. At the national and international level, this phenomenon has been referred to as the "natural resource curse," but the topic has received much less attention at the local level.
This article investigates how the recent boom in the U.S. natural gas industry has affected local economies in the central United States. Labor market conditions at the county level in a nine-state region are analyzed using econometric models to determine how employment and wages have responded to the rapid expansion of natural gas production from 2001 to 2011. The article finds a modest positive impact on local labor market outcomes in counties where natural gas production has increased, and little evidence of a natural resource curse.
Section I discusses factors leading to the shale boom in the natural gas industry and potential opportunities for the U.S. economy. Section II highlights factors that can lead to a natural resource curse or "blessing" and how those...