Friday, 12 June 2015

Fracking and economic growth

Following on from several commentators' articles, I noted recently that the counties and commuting zones located in fracking states tend to have high rates of upward mobility for boys, as measured by Chetty et al.'s new estimates of the causal impact of growing up in different areas of the US. Here I examine whether fracking states have experienced more economic growth since 2005 than non-fracking states, again defining fracking states as those in which >1,000 fracking wells have been drilled since 2005. The chart below plots the percentage growth in real GDP per capita since 2005 for the 50 states, using data from the Bureau of Economic Analysis. 

Fracking states are overrepresented among those that have experienced the most per-capita economic growth since 2005. On average, fracking states grew by 10.7%, whereas non-fracking states grew by only 1.3% (t-test: p = 0.008). Excluding North Dakota, which is obviously something of an anomaly, fracking states grew by 6.1% (t-test: p = 0.061). As noted in the discussion of upward income mobility, North Dakota sits atop the heavily fracked Bakken shale, which likely helps to explain its extraordinary growth of 57%. Since 2005, US real GDP per capita has increased by 4.8%, meaning that North Dakota grew by 52 percentage-points more than the country as a whole. Indeed, based on data from the IMF, if North Dakota were a separate country, it would have been the 19th fastest growing country in the world over the relevant time period, putting it at the 90th percentile of the global distribution.

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