the empirical content of the roy model this paper clarifies and extends the classical roy model of self selection and earnings inequality the original roy model based on the assumption that log skills are normally distributed is shown to imply that pursuit of comparative advantage in a free market reduces earnings inequality compared to the earnings distribution that would result if workers were randomly assigned to sectors aggregate log earnings are right skewed even if one sectoral distribution is left skewed most major implications of the log normal roy model survive if differences in skills are log concave however few implications of the model survive if skills are generated from more general distributions we consider the identifiability of the roy model from data on earnings distributions the normal theory version is identifiable without regressors or exclusion restrictions sectoral distributions can be identified knowing only the aggregate earnings distribution for general skill distributions the model is not identified and has no empirical content with sufficient price variation the model can be identified from multimarket data cross sectional variation in regressors can substitute for price variation in restoring empirical content to the roy model

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

the long term consequences of resource based specialisation using geological variation in oil abundance in the southern us i examine the long term effects of resource based specialisation through economic channels in 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production from 1940 90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing oil abundant counties had higher population growth higher per capita income and better infrastructure 2010 the author s the economic journal 2010 royal economic society

the big push natural resource booms and growth a simple application of big push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries in this paper we present evidence from seven latin american countries that natural resource booms are sometimes accompa nied by declining per capita gdp we present a model with natural resources increasing returns in the spirit of big push models and expectations to clarify some of the reasons this may happen q 1999 elsevier science b v all rights reserved

wage and employment growth in america s drug epidemic is all growth created equal the rise in drug overdose deaths in the united states since the turn of the millennium has been extraordinary a popular narrative paints a picture whereby opioid overdoses among white male less educated rural workers have been caused by reduced economic opportunities borne by such people in this article we causally test the validity of this theory by using bartik type variables to explore the relationship between local economic conditions and county opioid overdose death rates we add to the literature by exploring how both employment and wage growth in different types of industries are related to opioid overdose deaths for the population as a whole as well as for rural vs urban male vs female and white vs black populations we find mixed evidence our results confirm that wage and employment growth in industries more likely to employ low skill workers are important protective factors for rural white males however we also find evidence that economic improvements in low skill industries are just as important in protecting blacks and women against opioid overdoses and for workers in metro counties we also find evidence that employment growth in high paying industries has led to increases in opioid overdoes rates

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

embodied technological change learning by doing and the productivity slowdown the productivity slowdown faced by the us economy since the first oil shock has been associated with a rise in the decline rate of the relative price of equipment and a reduction in the rate of disembodied technical change we build up a growth model in which learning by doing is the engine of both embodied and disembodied technological progress a change in the relative efficiency of learning by doing from the consumption to the investment sector is shown to imply a technological reassignment consistent with the above mentioned evidence this result derives from the interaction between the obsolescence costs inherent to embodiment and the learning by doing engine

long term effects of income specialization in oil and gas extraction the u s west 1980 2011 abstract the purpose of the study is to evaluate the relationships between oil and natural gas specialization and socioeconomic well being during the period 1980 to 2011 in a large sample of counties within the six major oil and gas producing states in the interior u s west colorado montana new mexico north dakota utah and wyoming the effects of participation in the early 1980s oil and gas boom and long term specialization were considered as possible drivers of socioeconomic outcomes generalized estimating equations were used to regress 11 measures of economic growth and quality of life on oil and gas specialization while accounting for various confounding factors including degree of access to markets initial socioeconomic conditions in 1980 and dependence on other economic sectors long term oil and gas specialization is observed to have negative effects on change in per capita income crime rate and education rate participation in the early 1980s boom was positively associated with change in per capita income however the positive effect decreases the longer counties remain specialized in oil and gas our findings contribute to a broader public dialogue about the consequences of resource specialization involving oil and natural gas and call into question the assumption that long term oil and gas development confers economic advantages upon host communities

identifying reduced form relations with panel data the case of pollution and income abstract in this paper we propose a solution to the non robustness that plagues the estimation of inverted u shaped relationships using panel data such as the relation between pollution and income when dependent and independent variable like pollution and income are both time related separating the effect of the independent variable from time effects brings about a fundamental identification dilemma the imposition of restrictions on the controls might drive the shape of the relationship between the dependent pollution and independent income variables our solution consists of imposing the very weak constraint that arbitrary cross sectional units have the same relationship we apply our methodology to two widely studied cases namely so 2 and co 2 emissions interestingly our estimates are insensitive to the required subjective choices but also strongly differ from the literature so far we find consistent positive income effects for both cases and time effect estimates with a clear u shaped trend for so 2 emissions but only slightly so for co 2 emissions

estimating labour supply responses using tax reforms the 1980 s tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labor supply effects nevertheless changing sample composition aggregate shocks the changing composition of the tax paying population and discontinuities in the tax system create serious identification and estimation problems we develop grouping estimators that address these issues our results reveal positive and moderately sized wage elasticities we also find negative income effects for women with children

the economic aftermath of resource booms evidence from boomtowns in the american west the current us oil and gas boom is injecting labour capital and revenue into communities near reserves will these communities be cursed with lower long run incomes in the wake of the boom we study the oil boom and bust cycle of the 1970s and 1980s to gain insights using annual data on drilling to identify western boom and bust counties we find substantial positive local employment and income effects during the boom in the aftermath of the bust however we find that incomes per capita decreased and unemployment compensation payments increased relative to what they would have been if the boom had not occurred

monetary policy shocks what have we learned and to what end this paper reviews recent research that grapples with the question what happens after an exogenous shock to monetary policy we argue that this question is interesting because it lies at the center of a particular approach to assessing the empirical plausibility of structural economic models that can be used to think about systematic changes in monetary policy institutions and rules the literature has not yet converged on a particular set of assumptions for identifying the effects of an exogenous shock to monetary policy nevertheless there is considerable agreement about the qualitative effects of a monetary policy shock in the sense that inference is robust across a large subset of the identification schemes that have been considered in the literature we document the nature of this agreement as it pertains to key economic aggregates

do resource dependent regions grow slower than they should abstract a large literature documents a negative correlation between income growth and resource dependence this correlation has been named the resource curse we present evidence that suggests that the resource curse can be explained by a slow growing resource sector

the economic impact of shale gas extraction a review of existing studies abstract recent advances in drilling technology have allowed for the profitable extraction of natural gas from deep underground shale rock formations several reports sponsored by the gas industry have estimated the economic effects of the shale gas extraction on incomes employment and tax revenues none of these reports has been published in an economics journal and therefore have not been subjected to the peer review process yet these reports may be influential to the formation of public policy this commentary provides written reviews of several studies purporting to estimate the economic impact of gas extraction from shale beds due to questionable assumptions the economic impacts estimated in these reports are very likely overstated

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

what goes up must come down the recent economic cycles of the four most oil and gas dominated states in the us abstract the recent boom and bust in the us oil and natural gas sector provide a unique opportunity to assess whether the impacts of energy development are symmetric across the differing phases of the energy cycle this study uses the synthetic control method to examine the boom and bust effects for the four most oil and gas dominated states louisiana north dakota oklahoma and wyoming the four states are chosen as case studies because of their status as top oil and gas producers and the stronger influence of the oil and gas sector on their overall economies the results reveal differing employment impacts across the four states in both the short and long run and asymmetry during the boom and bust phases variation in the overall impacts and asymmetry of impacts across the boom bust cycle are suggested to be at least in part connected to state and local government expenditures

resource abundance and economic growth in the united states abstract it is a common assumption that regions within the same country converge to approximately the same steady state income levels the so called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions empirical data seem to support the absolute convergence hypothesis for us states but the data also show that natural resource abundance is a significant negative determinant of growth we find that natural resource abundance decreases investment schooling openness and r d expenditure and increases corruption and we show that these effects can fully explain the negative effect of natural resource abundance on growth

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

local labor market impacts of energy boom bust boom in western canada abstract the impacts of energy price boom and bust are analyzed through the differential growth in employment and earnings between local labor markets with and without energy resources in western canada the estimated differentials attributed to the boom induced labor demand shocks show significant direct and indirect impacts on the earnings and employment within the energy extraction and other non energy local sectors respectively the local job multipliers indicate that job creation within the energy extraction sector leads to modest job creation within the non energy local sectors during boom periods for every ten energy extraction jobs created during a boom period approximately three construction jobs two retail jobs and four and a half service jobs are created

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

local labor markets and natural resources a synthesis of the literature a primary way that natural resources affect a locality is through the demand for labor with greater extraction requiring more workers shifts in labor demand can be measured through changes in employment and earnings the main labor market outcomes or through changes in the population and income more generally these changes may spillover into the nonresource economy leading to greater overall effects or possibly crowd out be spread unequally across the population thereby altering the distribution of income and the poverty rate or influence educational attainment as people choose between additional schooling and work in this review the literature linking natural resources to local labor markets is synthesized by organizing existing studies according to their resource measurement and the outcomes that they consider this synthesis provides an accessible guide to a literature that has boomed in recent years it also identifies promising avenues for future research and lays a foundation to further generalize the evidence through an eventual meta analysis

causal parameters and policy analysis in economics a twentieth century retrospective the major contributions of twentieth century econometrics to knowledge were the definition of causal parameters within well defined economic models in which agents are constrained by resources and markets and causes are interrelated the analysis of what is required to recover causal parameters from data the identification problem and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced this paper summarizes the development of these ideas by the cowles commission the response to their work by structural econometricians and var econometricians and the response to structural and var econometrics by calibrators advocates of natural and social experiments and by nonparametric econometricians and statisticians this paper considers the definition and identification of causal parameters in economics and their role in econometric policy analysis it assesses different research programs designed to recover causal parameters from data at the beginning of this century economic theory was mainly intuitive and empirical support for it was largely anecdotal at the end of the century economics has a rich array of formal models and a high quality database empirical regularities motivate theory in many areas of economics and data are routinely used to test theory many economic theories have been developed as measurement frameworks to suggest what data should be collected and how they should be interpreted econometric theory was developed to analyze and interpret economic data most econometric theory adapts methods originally developed in statistics the major exception to this rule is the econometric analysis of the identification problem and the companion analyses of structural equations causality and economic policy evaluation although an economist did not invent the phrase correlation does not imply causation 1 economists clari

economics of modern energy boomtowns do oil and gas shocks differ from shocks in the rest of the economy abstract the us shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance research has produced mixed results and has not compared how energy shocks differ from equal sized shocks elsewhere in the economy what emerges is that the estimated impacts of energy development vary by region empirical methodology as well as the time horizon that is considered this paper captures these dimensions to present a more complete picture of energy boomtowns utilizing us county data we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector we compare this to the effects of equal sized shocks in the rest of the economy to assess whether energy booms are inherently different the analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables we difference over 1 3 6 and 10 year time periods to account for county fixed effects and to assess responses across different time horizons the results show that in nonmetro counties energy sector multiplier effects on total county employment first increase up to 6 year horizons and then decline for 10 year horizons we also observe positive spillovers to the non traded goods sector while spillovers are small or negative for traded goods in metro counties there are no significant effects on total employment although positive spillovers are present in some sectors yet equal sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks suggesting that policymakers should seek more diversified development

income and employment effects of shale gas extraction windfalls evidence from the marcellus region 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 effect 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

cornucopia or curse reviewing the costs and benefits of shale gas hydraulic fracturing fracking this study assesses the overall technical economic environmental and social costs and benefits of the hydraulic fracturing fracking of natural gas drawn from a review of more than 100 studies looking at shale gas in the past 10 years most of them peer reviewed this article begins by briefly explaining the process of hydrofracking and summarizing recent market trends up until late 2013 then the study discusses a series of advantages and disadvantages to hydrofracking it notes that done properly shale gas development can enhance energy security and the availability of energy fuels lower natural gas prices offer a cleaner environmental footprint than some other fossil fuels and enable local economic development however done poorly production can be prone to accidents and leakage contribute to environmental degradation induce earthquakes and when externalities are accounted for produce more net economic losses than profits the study concludes that the pursuit and utilization of shale gas thus presents policymakers planners and investors with a series of pernicious tradeoffs and tough choices

who benefits from local oil and gas employment labor market composition in the oil and gas industry in texas and the rest of the united states abstract this paper examines local labor market outcomes from an oil and gas boom we examine two main outcomes the probability of employment and the log wages of workers employed outside the oil and gas industry for texas and the rest of the united states across gender race and ethnicity we find that men and women gain employment in the oil and gas industry during booms but such gains are much larger for men and are largest for black and hispanic men we also find positive income spillovers for workers in other industries that are similar in magnitude across demographic groups

substitution and dropout bias in social experiments a study of an influential social experiment this paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it and when persons randomized into a program drop out to pursue better alternatives using data from an experimental evaluation of a classroom training program we document the empirical importance of control group substitution and treatment group dropping out evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective although that is the way experimental evidence is often interpreted

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question