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
Date Written: March 2, 2018
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: Suggested Citation