The Local Economic and Welfare Consequences of Demand Shocks for Coal Country

Abstract

This paper applies the outputs of a stylized dispatch model of the US electricity sector to estimate the local welfare effects of demand-driven declines in coal production. I find that coal producing regions shed jobs and wages primarily in coal mining and adjacent industries, with effects occurring both in Eastern and Western producing regions. In-migration, home values, and expenditures on public education also decline, and poverty increases. Applied in a spatial equilibrium framework under varying assumptions, my estimates imply an aggregate decline on the order of $1 billion in the economic welfare of coal country residents due to a net decline of $8.03 billion in thermal coal production value from 2007-2017.

Keywords: Coal, Coal Country, Demand Shocks, Just Transition

JEL Classification: Q, P, R