Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America

Do natural resources benefit producer economies, or is there a “Natural Resource Curse” as Dutch Disease crowds out local manufacturing productivity spillovers? We combine new data on oil and gas endowments with Census of Manufactures microdata to estimate how oil and gas booms affect local economies in the United States. Migration does not fully offset labor demand growth, so local wages rise. Notwithstanding, manufacturing is actually procyclical with resource booms, driven by growth in upstream and locally-traded sectors. As of the end of the 1990s, there were no remaining effects of the boom and bust of the 1970s and 1980s on manufacturing productivity and other economic outcomes. This implies that “learning-bydoing” effects, which are central to the Dutch Disease story, were not significant. Over the full 1969-2014 sample, a county with one standard deviation additional oil and gas endowment averaged about one percent higher real wages. JEL Codes: J21, L60, L71, O13, Q33, R11 ——————————————————————————— We thank Yunmi Kong and Wendy Wei for superb research assistance and Julia Garlick for help in data preparation. We are grateful for feedback from Costas Arkolakis, Nathaniel BaumSnow, Dan Black, Rick Hornbeck, Ryan Kellogg, Pat Kline, Erin Mansur, Enrico Moretti, Reed Walker, and seminar participants at the ASSA Annual Meetings, Bates White, Berkeley, Bocconi, the Census Center for Economic Studies, Centre de Recherche en Economie et Statistique, Cornell, Helsinki Center of Economic Research, LSE and UCL, Michigan State, NYU, Oxford, Sussex, Toulouse, Wharton, the World Bank, and Yale. Thanks also to Randy Becker, Allan Collard-Wexler, Jonathan Fischer, Todd Gardner, Cheryl Grim, Javier Miranda, Justin Pierce, and Kirk White for their advice and help in using U.S. Census of Manufactures data, and to Jean Roth for advice on the Current Population Survey. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. ∗Allcott: NYU Department of Economics and NBER. Email: [email protected]. Keniston: Yale Department of Economics and NBER. Email: [email protected].