Monday, August 25, 2014

Oil and gas booms lead to over-reliance on industry, depleted economies when it's all over

Areas experiencing oil booms and gas booms often end up worse off economically when the boom ends than they would have if there had never been a boom, says a study that will appear in an upcoming issue of The Economic Journal, Tim Marema reports for the Daily Yonder. The study, which looked at 391 rural counties in nine states that experienced booms from 1975 to 1985, says, “The boom created substantial short-term economic benefits, but also longer-term hardships that persisted in the form of joblessness and depressed local incomes.”

"The study found that after the boom came a period of decline that resulted in those counties faring worse than economists would have predicted," Marema writes. Researchers said, "In the longer run, relative per capita incomes in boom counties became depressed after the bust and showed no clear signs of recovery at the end of our sample period.”

"The scholars say the best explanation for the economic decline in the resource-dependent counties was that local workers and businesses became over-reliant on the energy industry," Marema writes. "When the oil and gas boom ended, businesses that had catered to the industry and its workers had difficulty adjusting. And workers who had jobs in the energy industry had a hard time using their skills in other kinds of work." (Read more)

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