Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America

Abstract

Do natural resources benefit producer economies, or is there a "Natural Resource Curse," perhaps as Dutch Disease crowds out manufacturing? We combine new data on oil and gas abundance with Census of Manufactures microdata to estimate how oil and gas booms have affected local economies in the United States. Migration does not fully offset labor demand growth, so local wages rise. Notwithstanding, manufacturing is actually pro-cyclical with resource booms, driven by growth in upstream and locallytraded sectors. The results highlight the importance of highly local demand for many manufacturers and underscore how natural resource linkages can drive manufacturing growth.