The Local Economic and Welfare Consequences of Hydraulic Fracturing
Exploiting geological variation within shale deposits and timing in the initiation of hydraulic fracturing, this paper finds that allowing fracing leads to sharp increases in oil and gas recovery and improvements in a wide set of economic indicators. At the same time, estimated willingness-to-pay (WTP) for the decrease in local amenities (e.g., crime and noise) is roughly equal to -$1000 to -$1,600 per household annually (-1.9% to -3.1% of mean household income). Overall, we estimate that WTP for allowing fracing equals about $1,300 to $1,900 per household annually (2.5% to 3.7%), although there is substantial heterogeneity across shale regions.
This paper has benefited from conversations with John Deutch, Lucas Davis, Manasi Deshpande, Joseph Doyle, Esther Duflo, and Edson Severnini, and seminar participants at the ASSA 2014 Meetings, the Center for Energy and Environmental Policy Research Spring Workshop, the Energy Institute @Haas Summer Energy Camp, MIT, Tufts University, University of Chicago, and the NBER Summer Institute. We thank Brian Goggin, Faraz Hayat, Colin McDonnell, Ishan Nath, Lucy Page, Jonathan Petkun, Harshil Sahai, and Daniel Stuart for excellent research assistance. Greenstone gratefully acknowledges financial support from MIT’s Provost Office. Bartik gratefully acknowledges funding from the MIT Center for Energy and Environmental Policy Research (CEEPR). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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Alexander W. Bartik & Janet Currie & Michael Greenstone & Christopher R. Knittel, 2019. "The Local Economic and Welfare Consequences of Hydraulic Fracturing," American Economic Journal: Applied Economics, vol 11(4), pages 105-155. citation courtesy of