Michael L. Troilo Ronald D. Ripple U.S. Natural Gas Development and Economic Growth: A State-Level Analysis Michael L. Troilo Ronald D. Ripple October 25, 2016

Outline Motivation and intended contribution Data, variables and methods Results Discussion and conclusion October 25, 2016

Motivation and intended contribution U.S. natural gas production has climbed from 18.9 trillion cubic feet to 28.8 trillion cubic feet from 2005 to 2015 (US Energy Information Administration). The effects of natural gas production can be either a blessing (Weber, 2012; 2014) or a curse (Weber, 2014) to gas-rich US states. Our analysis examines the impact of natural gas development on employment, wages, capital outlays, and highway expenditures in the five leading US states from 1984-2015. It is a more comprehensive study than prior work. October 25, 2016

Data, variables, and methods Dependent variables-economic outcomes Employment-the number of full and part-time jobs (Bureau of Economic Analysis-BEA) Wages and salaries-Total remuneration in thousands of US dollars (BEA) Capital outlays-Total capital spending in thousands of US dollars (Census) Highway expenditures-Total highway spending in thousands of US dollars (Census) Variable of interest: Production value-Value in US dollars of gross natural gas withdrawals * city gate price (US EIA). Control variables Real per-capita GDP, in chained 2009 US dollars (BEA) % of GDP from Agriculture % of GDP from Industry Population Panel regressions for all states and OLS for each state. October 25, 2016

Summary statistics Mean Std. Dev. Min Max Employment 4.5 million 258 K 16 million Wages $127 billion $145 billion $3.7 billion $660 billion Capital outlay $2.2 billion $2.3 billion $209 K $8.8 billion Highway exp. $226 K $8.7 billion Production value $12.1 billion $12.2 billion $327 million $71.8 billion Real per-cap GDP $43,423 $7,702 $31,218 $69,973 Population 8.3 million 7.6 million 454 K 27.5 million October 25, 2016

Results (1): Panel regressions Employment Wages Capital Highway Production value 0.019*** 3.011*** 0.087*** 0.057*** Average effect of production compared to average value 0.23 million/4.5 million 5.1% $36 billion/ $127 billion 28.3% $1.1 billion/ $2.2 billion 47.1% $689 million/$2.3 billion 30.3% Obs. 155 160 R-squared 0.99 0.91 0.82 October 25, 2016

Results (2): OLS Employment LA OK PA TX WY Production value 0.016*** 0.006* 0.007 0.008* 0.002** Average effect of production compared to average value 0.2 million/2.3 million 8.7% 0.05 million/1.9 million 2.6% Not significant 0.25 million/11.7 million 2.1% 0.013 million/0.3 million 4.3% Obs. 31 R-squared 0.97 0.98 0.99 October 25, 2016

Results (3): OLS Wages LA OK PA TX WY Production value 1.975*** 0.646** 2.258*** 0.067 0.128* Average effect of production compared to average value $22.5 billion/ $57.8 billion 38.9% $5.2 billion/ $43.8 billion 11.9% $7.7 billion/ $189 billion 4.1% Not significant $879 million/$7.9 billion 11.1% Obs. 32 R-squared 0.92 0.98 0.99 0.97 October 25, 2016

Results (4): OLS Capital Outlays OK PA TX WY Production value 0.087** 0.017 0.110** 0.089*** 0.003 Average effect of production compared to average value $992 million/ $1.4 billion 70.9% Not significant $375 million/ $3.3 billion 11.4% $2.7 billion/ $5.1 billion 52.9% Obs. 31 R-squared 0.74 0.83 0.92 0.94 0.87 October 25, 2016

Results (5): OLS Highway Expenditures LA OK PA TX WY Production value 0.076** -0.000 0.128** 0.072*** 0.002 Average effect of production compared to average value $866 million/ $1.2 billion 72.2% Not significant $437 million/ $4.1 billion 10.7% $2.2 billion/$4.7 billion 46.8% Obs. 31 R-squared 0.75 0.92 0.94 0.90 October 25, 2016

Discussion and conclusion As expected, natural gas production matters for economic outcomes. The interesting findings are differences across the panel and by state. For the panel, the largest effect is on capital outlays, followed by highway expenditures and wages. Natural gas production has the most pronounced impact on Louisiana, followed by Texas. Similar to Weber (2012, 2014), we find that natural gas production is a blessing rather than a curse. One extension may be to relate natural gas production to social welfare, e.g. state payments for education and healthcare. October 25, 2016