Long term consequences of natural resource booms for human capital accumulation

Theoretical and empirical work seems to support the idea that tight labour markets driven by resource booms induce young individuals to leave school for employment as the opportunity cost of schooling increases. Resource booms may have an adverse long term effect on the productivity of the labor force if workers under-invest in human capital rather than merely altering the timing of schooling. We explore the validity of this thesis using the Albertan 19731981 oil-boom, which created a period of rapid growth both in wages and employment in Alberta relative to the rest of Canada, and analyze the effect of this oil-boom on the long-term human capital investments and productivity for birth cohorts that were of normal schooling ages before, during and after the oil boom. Our findings suggest that resource booms may change the timing of schooling but do not seem to affect greatly the total accumulation of human capital. 1 Department of Economics, University of Calgary 2 Department of Economics, University of British Columbia