Local Labor Market Shocks and Employment and Earnings Differentials: Evidence From Shale Oil and Gas Booms

Abstract

We show that a labor demand shock to specific workers (male workers with high school education) in a specific industry (oil and gas sector) can significantly impact earnings differentials within sectors not directly impacted by the productivity shock. Specifically, we estimate that areas impacted by the shale boom experienced a 3% decrease (2.7% increase) in the high-/low-skilled (male/female) earnings differential relative to unaffected areas. The corresponding effects on employment differentials are -4.4% and 3.7%, respectively. These effects are also observed within sectors not directly impacted by the boom. Results highlight the importance of considering the differential effects of technology shocks by education and gender in studying earnings inequality.