Sectoral Job Creation and Destruction Responses to Oil Price Changes

60 Pages Posted: 7 Aug 2012 Last revised: 23 Apr 2013

See all articles by Steven J. Davis

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER)

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Date Written: April 1999

Abstract

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.

Suggested Citation

Davis, Steven J. and Haltiwanger, John C., Sectoral Job Creation and Destruction Responses to Oil Price Changes (April 1999). NBER Working Paper No. w7095. Available at SSRN: https://ssrn.com/abstract=164933

Steven J. Davis (Contact Author)

University of Chicago ( email )

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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Institute for the Study of Labor (IZA) ( email )

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Germany

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