Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts

49 Pages Posted: 19 May 2017 Last revised: 9 Mar 2018

See all articles by Jason Brown

Jason Brown

Federal Reserve Bank of Kansas City

Date Written: March 2, 2018

Abstract

Local shocks in oil and gas development may lead consumers to increase their spending. Using quarterly information on consumer debt and oil and gas activity between 2000 and 2016, I find that consumer debt increased at a peak of $840 per capita, equivalent to 1.7 percent of median household income in counties with shale endowment and increased drilling. Shocks to local wages via drilling revealed a marginal propensity to consume from debt of 0.45. Relative to areas with oil and gas development experience, the marginal propensity to consume was 70 percent larger in previously undeveloped areas.

Keywords: oil and gas; income shock; consumer debt

JEL Classification: D12, R11, Q32, Q33

Suggested Citation

Brown, Jason, Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts (March 2, 2018). Federal Reserve Bank of Kansas City Working Paper No. RWP 17-05, Available at SSRN: https://ssrn.com/abstract=2971138 or http://dx.doi.org/10.2139/ssrn.2971138

Jason Brown (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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