Asset Ownership, Windfalls, and Income: Evidence From Oil and Gas Royalties

51 Pages Posted: 5 May 2017

See all articles by Jason Brown

Jason Brown

Federal Reserve Bank of Kansas City

Timothy Fitzgerald

Texas Tech University; Independent

Jeremy Weber

University of Pittsburgh - Graduate School of Public & International Affairs

Date Written: May 4, 2017

Abstract

The recent oil and gas production boom in the contiguous United States generated tens of billions in additional royalty income for owners of oil and gas rights. We use the royalty income shock to study the local multiplier effect of unanticipated income and find that each royalty dollar received by county residents created an additional $0.50 in local income, mostly through greater wage income. The finding suggests that royalty payments and government transfers have similar local multiplier effects. In aggregate, the total income effect from royalties was $68 billion in 2014, or 0.5 percent of U.S. personal income. Over the 2000 to 2014 period, royalty income and its multiplier effect accounted for more than two-thirds of the local income effect of oil and gas development. The estimates help explain why the income effects of drilling may vary widely across regions based on patterns of resource ownership.

Keywords: resource ownership; oil and gas; royalties; shale; income multiplier

JEL Classification: D23, R11, Q32, Q33

Suggested Citation

Brown, Jason and Fitzgerald, Tim and Weber, Jeremy, Asset Ownership, Windfalls, and Income: Evidence From Oil and Gas Royalties (May 4, 2017). Available at SSRN: https://ssrn.com/abstract=2963775 or http://dx.doi.org/10.2139/ssrn.2963775

Jason Brown (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

Tim Fitzgerald

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Independent ( email )

Jeremy Weber

University of Pittsburgh - Graduate School of Public & International Affairs ( email )

Pittsburgh, PA 15260-0001
United States

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