Assessing a Model for Quantifying Economic Shifts in an Energy-Based Economic System
In the United States, the energy sector has played a significant role in shaping the economic landscape, particularly in rural areas. Between 2001 and 2013, an average non-metro county experienced a modest 0.1% annual job growth due to the energy sector [1].
This growth, however, didn't come without consequences. Research indicates that the manufacturing and agriculture sectors lost jobs in non-metro counties as a result of energy sector growth [2]. This trend highlights the need for a balanced approach to energy development, one that considers the impact on various sectors of the economy.
To understand the local impacts of energy development, a model was developed by a research team, as part of the project "Maximizing the Gains of Old and New Energy Development for America's Rural Communities." The model, using data from Economic Modeling Services, Inc. (EMSI) and other publicly available sources, takes into account a variety of factors [3]. These include local employment levels and changes, income levels and wage rates, business activity measures, population demographics, investment flows, local government revenues and expenditures, energy production and consumption data, infrastructure development indicators, worker skills and workforce development, and health and well-being metrics [3].
The model also considers the dynamic time path for the energy boom over a 1, 3, 6, and 10-year time period, and uses an instrumental variable approach to account for endogeneity bias [4]. Interestingly, the positive effects of energy sector growth in non-metro counties peak at six years and decline afterwards [5].
In metro counties, the effects of energy sector expansion on employment are less pronounced compared to non-metropolitan counties. However, crowding out in metro counties causes the manufacturing sector to decline as a result of energy sector expansion, while employment in the transportation and warehousing sectors increases after one year [6].
The U.S. shale energy boom has increased interest in how the expanding oil and gas sector affects local economic performance. The research series, based on the project "Maximizing the Gains of Old and New Energy Development for America's Rural Communities," summarizes this research over six chronological fact sheets [7].
The model examines the total employment as well as employment in 14 energy-related sectors across all U.S. areas between 1993 and 2013 [8]. Construction, transportation and warehousing, wholesale trade, accommodation and food, real estate, and real estate sectors benefited most in terms of new employment in non-metro counties [9].
Communities anchored in the energy economy are more exposed to economic shocks than well-diversified economies. A diversified local economy, according to the research model, has a greater growth potential compared to an economy relying on jobs from an energy boom [10].
This research underscores the importance of considering the broader economic impacts when planning for energy development. By understanding these impacts, policymakers can make informed decisions that promote sustainable economic growth and minimise negative consequences for local communities.
References: [1] [source] [2] [source] [3] [source] [4] [source] [5] [source] [6] [source] [7] [source] [8] [source] [9] [source] [10] [source]
The energy sector's growth in rural America, as shown in the research, has led to a decrease in jobs in the manufacturing and agriculture sectors, highlighting the importance of a balanced approach to energy development [2]. The model developed for the project "Maximizing the Gains of Old and New Energy Development for America's Rural Communities" considers various factors, including business activity measures and the finance sector, to understand the local impacts of energy development [3]. The expanding oil-and-gas sector, stemming from the U.S. shale energy boom, not only affects employment in energy-related sectors like construction and transportation, but also underscores the significance of a diversified local economy for sustainable economic growth [9, 10].
