Sectoral Job Creation and Destruction Responses to Oil Price Changes
Steven J. Davis
University of Chicago; National Bureau of Economic Research (NBER)
University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
NBER Working Paper No. w7095
We study the effects of oil price changes and other shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. We find that oil shocks account for about 20-25 percent of the cyclical variability in employment growth under our identifying assumptions, twice as much as monetary shocks. Employment growth shows a sharply asymmetric response to oil price ups and downs, in contrast to the prediction of standard equilibrium business cycle models. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity, and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation in every sector with the clear exception of young, small plants. Oil shocks also generate important reallocative effects. For example, we estimate that job reallocation rose by 11 percent of employment over 3-4 years in response to the 1973 oil shock. More than 80 percent of this response reflects greater job reallocation activity within manufacturing.
Number of Pages in PDF File: 60working papers series
Date posted: August 7, 2012
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