Federal Reserve Bank of Kansas City
Research Working Paper
Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts
This paper investigates how consumers respond to local income shocks as a result of booms and busts in oil and gas development. Oil and gas development generates potentially large streams of income via wages and salaries to workers and royalty income to mineral rights owners. Changes in development may lead consumers to increase their spending depending on their exposure to income shocks. Using quarterly information on consumer debt and oil and gas activity, I ﬁnd that consumer debt increased at a peak of $840 per capita in counties with shale endowment and increased drilling. Each well drilled was associated with $6,750 in consumer debt for an implied total of $2.7 billion or 0.5 percent of consumer debt in areas where drilling occurred from 2007 to 2015.
Consumers in previously developed areas tend to view new increases in activity as transitory relative to areas with little previous development that experience a shock.
Cite this item
Jason Brown, Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts, Federal Reserve Bank of Kansas City, Research Working Paper RWP 17-5, 01 May 2017.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
Keywords: Oil; Gas; Income shock; Consumer debt
This item with handle RePEc:fip:fedkrw:rwp17-05
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