1. 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

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

3. 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 It is a more comprehensive study than prior work.
October 25, 2016

4. 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

5. 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

6. 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

7. Results (2): OLS EmploymentLA 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

8. 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

9. Results (4): OLS Capital OutlaysOK 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

10. Results (5): OLS Highway ExpendituresLA 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

11. 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