Local economic impact of boom and bust in mineral resource extraction in the United States: A spatial econometrics analysis

Abstract

This paper examines how shocks in the U.S. mineral resource extraction (MRE) industry impact MRE-dependent counties using county level data between 1970- and 2012. A difference-in-difference fixed effects model and a spatial modeling to incorporate spatial heterogeneity and dependence among U.S. local areas that are in close geographical proximity are employed in this study. The results show that MRE industry employment grew faster during boom periods and slower during the bust period in MRE dependent counties. MRE earnings and earnings per worker grew slower during boom periods and faster during the bust period. The findings give evidence of negative spatial indirect spillover effects between neighboring counties’ MRE sector labor markets. An analysis of the effect of shocks in the MRE sector on the non-MRE sectors shows that in MRE dependent counties non-MRE sector employment grew slower during boom periods and faster during the bust period. Positive shocks in the MRE sector had no effect on the manufacturing sector labor market; however, negative shocks had a positively effect. Booms in the MRE sector positively impacted the construction sector, while negatively affecting the service and retail trade sectors’ labor markets in MRE dependent counties. Finally, this study finds that male population grew faster, while female population grew slower in the MRE dependent counties.