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Working Paper
150 years of boom and bust: what drives mineral commodity prices?
My paper provides long-run evidence on the dynamic effects of supply and demand shocks on mineral commodity prices. I assemble and analyze a new data set of price and production levels of copper, lead, tin, and zinc from 1840 to 2010. Price fluctuations are primarily driven by demand rather than supply shocks. Demand shocks affect the price persistently for up to five-teen years, whereas the effect of mineral supply shocks persists for a maximum of five years. My paper shows that price surges caused by rapid industrialization are a recurrent phenomenon throughout history. Mineral commodity ...
Working Paper
What drives commodity price booms and busts?
What drives commodity price booms and busts? We provide evidence on the dynamic effects of commodity demand shocks, commodity supply shocks, and inventory demand shocks on real commodity prices. In particular, we analyze a new data set of price and production levels for 12 agricultural, metal, and soft commodities from 1870 to 2013. We identify differences in the type of shock driving prices of the various types of commodities and relate these differences to commodity types which reflect differences in long-run elasticities of supply and demand. Our results show that demand shocks strongly ...
Working Paper
Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties
How does local versus absentee ownership of natural resources?and their associated income?shape the relationship between extraction and local income? Theory and empirics on natural resources and the broader economy have focused heavily on labor markets, largely ignoring the economic implications of payments to resource owners. We study how local ownership of oil and gas rights shapes the local income effects of extraction. For the average U.S. county that experienced an increase in oil and gas production from 2000 to 2013, increased royalty income and its associated economic stimulus ...
Working Paper
Boom Town Business Dynamics
The shale oil and gas boom in the U.S. provides a unique opportunity to study economic growth in a "boom town" environment, to derive insights about economic expansions more generally, and to obtain clean identification of the causal effects of economic growth on specific margins of business adjustment. The creation of new business establishments--separate from the expansion of existing establishments--accounts for a disproportionate share of the multi-industry employment growth sparked by the shale boom, an intuitive but not inevitable empirical result that is broadly consistent with ...
Working Paper
The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada
Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the ...
Working Paper
Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts
Local shocks in oil and gas development may lead consumers to increase their spending. Using quarterly information on consumer debt and oil and gas activity between 2000 and 2016, I find that consumer debt increased at a peak of $840 per capita, equivalent to 1.7 percent of median household income in counties with shale endowment and increased drilling. Shocks to local wages via drilling revealed a marginal propensity to consume from debt of 0.45. Relative to areas with oil and gas development experience, the marginal propensity to consume was 70 percent larger in previously undeveloped ...
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 ?nd that consumer debt increased at a peak of $840 per capita in counties with shale endowment and increased drilling. Each well ...
Working Paper
Borrowing Based on Great Expectations: Evidence from the Origins of Fracking
We use the origins of fracking to study how people respond to a large and uncertain permanent income shock. Following the arrival of news in 2003 that fracking was commercially viable, the average person owning rights to natural gas deposits in the Barnett Shale could plausibly expect to earn a present value of about $33,000 from leasing the rights to energy firms. Anticipating the income, people who signed leases after 2006 borrowed $5,400 more than non-leaseholders as of 2006. Leases not yet signed could not be collateralized, suggesting that expectations of increased permanent income ...
Working Paper
Rational but Not Prescient: Borrowing during the Fracking Boom
To study how income expectations affect borrowing, we use leased natural gas rights in Texas in the mid-2000s, which created potential for future leaseholder income without loosening credit constraints. In matching 11,000 leaseholders with non-leaseholders selected from a screened pool of 5.2 million, we find that the average leaseholder borrowed $13,000 more over the 2003–08 leasing boom. A consumption-smoothing modelindicates that leaseholders’ income expectations aligned with forecasts of persistently high natural gas prices. Yet, the unforeseeable success of fracking was associated ...