[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/66410.html
   My bibliography  Save this paper

On the comparative advantage of U.S. manufacturing:evidence from the shale gas revolution

Author

Listed:
  • Arezki, Rabah
  • Fetzer, Thiemo
Abstract
This paper provides the first empirical evidence of the newly found comparative advantage of the United States manufacturing sector following the so-called shale gas revolution. The revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world owing to the physics of natural gas. Results show that U.S. manufacturing exports have grown by about 6 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.

Suggested Citation

  • Arezki, Rabah & Fetzer, Thiemo, 2016. "On the comparative advantage of U.S. manufacturing:evidence from the shale gas revolution," LSE Research Online Documents on Economics 66410, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:66410
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/66410/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
    2. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    4. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    5. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 536-598, June.
    6. Andrew B Bernard & J. Bradford Jensen, 2007. "Firm Structure, Multinationals, and Manufacturing Plant Deaths," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 193-204, May.
    7. Maskus, Keith E & Webster, Allan, 1999. "Estimating the HOV Model with Technology Differences Using Disaggregated Labor Skills for the United States and the United Kingdom," Review of International Economics, Wiley Blackwell, vol. 7(1), pages 8-19, February.
    8. ., 2008. "How Do Economists Approach Microeconomic Policy?," Chapters, in: Microeconomic Policy, chapter 1, Edward Elgar Publishing.
    9. van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
    10. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    11. Agerton, Mark & Hartley, Peter R. & Medlock, Kenneth B. & Temzelides, Ted, 2017. "Employment impacts of upstream oil and gas investment in the United States," Energy Economics, Elsevier, vol. 62(C), pages 171-180.
    12. Lorenzo Caliendo & Robert C. Feenstra & John Romalis & Alan M. Taylor, 2015. "Tariff Reductions, Entry, and Welfare: Theory and Evidence for the Last Two Decades," NBER Working Papers 21768, National Bureau of Economic Research, Inc.
    13. Fernando M. Arag?n & Juan Pablo Rud, 2013. "Natural Resources and Local Communities: Evidence from a Peruvian Gold Mine," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 1-25, May.
    14. Harrigan, James, 1995. "Factor endowments and the international location of production: Econometric evidence for the OECD, 1970-1985," Journal of International Economics, Elsevier, vol. 39(1-2), pages 123-141, August.
    15. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    16. Bahar, Dany & Hausmann, Ricardo & Hidalgo, Cesar A., 2014. "Neighbors and the evolution of the comparative advantage of nations: Evidence of international knowledge diffusion?," Journal of International Economics, Elsevier, vol. 92(1), pages 111-123.
    17. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1095-1131.
    18. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January.
    19. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    20. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    21. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 441-487.
    22. Catherine Hausman & Ryan Kellogg, 2015. "Welfare and Distributional Implications of Shale Gas," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 71-139.
    23. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 31-66.
    24. Moretti, Enrico, 2004. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," Santa Cruz Department of Economics, Working Paper Series qt5cz0h23t, Department of Economics, UC Santa Cruz.
    25. Christopher R. Knittel & Konstantinos Metaxoglou & Andre Trindade, 2015. "Natural Gas Prices and Coal Displacement: Evidence from Electricity Markets," NBER Working Papers 21627, National Bureau of Economic Research, Inc.
    26. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    27. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    28. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, vol. 71(4), pages 801-801, September.
    29. Ann E. Harrison & Margaret S. McMillan, 2006. "Outsourcing Jobs? Multinationals and US Employment," NBER Working Papers 12372, National Bureau of Economic Research, Inc.
    30. Peter Debaere, 2014. "The Global Economics of Water: Is Water a Source of Comparative Advantage?," American Economic Journal: Applied Economics, American Economic Association, vol. 6(2), pages 32-48, April.
    31. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    32. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    33. James Feyrer & Erin T. Mansur & Bruce Sacerdote, 2017. "Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution," American Economic Review, American Economic Association, vol. 107(4), pages 1313-1334, April.
    34. Michael Greenstone & Enrico Moretti, 2003. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," NBER Working Papers 9844, National Bureau of Economic Research, Inc.
    35. Robert C. Feenstra, 2015. "Advanced International Trade: Theory and Evidence Second Edition," Economics Books, Princeton University Press, edition 2, number 10615.
    36. Robert E. Baldwin, 2008. "The Development and Testing of Heckscher-Ohlin Trade Models: A Review," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026562, April.
    37. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
    38. Thiemo Fetzer, 2014. "Fracking Growth," CEP Discussion Papers dp1278, Centre for Economic Performance, LSE.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julien Xavier Daubanes & Fanny Henriet & Katheline Schubert, 2021. "Unilateral CO2 Reduction Policy with More Than One Carbon Energy Source," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(3), pages 543-575.
    2. Wang, Qiang & Li, Shuyu & Li, Rongrong & Ma, Minglu, 2018. "Forecasting U.S. shale gas monthly production using a hybrid ARIMA and metabolic nonlinear grey model," Energy, Elsevier, vol. 160(C), pages 378-387.
    3. Jaimes, Richard & Gerlagh, Reyer, 2020. "Resource-richness and economic growth in contemporary U.S," Energy Economics, Elsevier, vol. 89(C).
    4. Ferriani, Fabrizio & Gazzani, Andrea, 2023. "The invasion of Ukraine and the energy crisis: Comparative advantages in equity valuations," Finance Research Letters, Elsevier, vol. 58(PD).
    5. Meier, Felix D. & Quaas, Martin F., 2021. "Booming gas – A theory of endogenous technological change in resource extraction," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    6. Ron H. Chan & Edward Manderson & Fan Zhang, 2022. "Indirect Energy Costs and Comparative Advantage," Economics Discussion Paper Series 2206, Economics, The University of Manchester.
    7. Yassine Kirat, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," Post-Print hal-03676616, HAL.
    8. Bajo-Buenestado, Raúl, 2018. "Relationship-specificity, incomplete contracts, and the pattern of trade: A comment on the role of natural resources," Energy Economics, Elsevier, vol. 75(C), pages 410-422.
    9. Hanwei Huang & Jiandong Ju & Vivian Z. Yue, 2017. "Structural adjustments and international trade: theory and evidence from China," CEP Discussion Papers dp1508, Centre for Economic Performance, LSE.
    10. Saussay, Aurelien & Sato, Misato, 2024. "The impact of energy prices on industrial investment location: evidence from global firm level data," LSE Research Online Documents on Economics 123034, London School of Economics and Political Science, LSE Library.
    11. Nida Cakir Melek & Michael Plante & Mine Yucel, 2021. "Resource Booms and the Macroeconomy: The Case of U.S. Shale Oil," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 307-332, October.
    12. Manderson, Edward J. & Kneller, Richard, 2020. "Energy endowments and the location of manufacturing firms," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    13. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    14. Dussaux, Damien & Monjon, Stéphanie, 2023. "Selling under other skies when energy prices skyrocket: How do the companies adapt their export strategy when energy prices rise?," Energy Policy, Elsevier, vol. 183(C).
    15. Kirat, Yassine, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," International Economics, Elsevier, vol. 167(C), pages 59-77.
    16. Eife, Thomas, 2020. "The General Equilibrium Effects of the Shale Revolution," Working Papers 0694, University of Heidelberg, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:cep:cepdps:dp1399 is not listed on IDEAS
    2. Elhanan Helpman, 2014. "Foreign Trade and Investment: Firm-level Perspectives," Economica, London School of Economics and Political Science, vol. 81(321), pages 1-14, January.
    3. Joseph Marchand & Jeremy Weber, 2018. "Local Labor Markets And Natural Resources: A Synthesis Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 469-490, April.
    4. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    5. Daniel Bernhofen, 2010. "The Empirics of General Equilibrium Tade Theory: What Have we Learned?," CESifo Working Paper Series 3242, CESifo.
    6. Costinot, Arnaud & Komunjer, Ivana, 2006. "What Good Do Countries Trade? New Ricardian Predictions," University of California at San Diego, Economics Working Paper Series qt9t9818ng, Department of Economics, UC San Diego.
    7. Idrisova, Vittoria (Идрисова, Виттория), 2017. "Determinants of Value-Added Exports: The Role of Import Demand Factors [Детерминанты Экспорта Добавленной Стоимости: Роль Факторов Спроса На Импорт]," Working Papers 051715, Russian Presidential Academy of National Economy and Public Administration.
    8. Ferdinando Monte & Stephen J. Redding & Esteban Rossi-Hansberg, 2018. "Commuting, Migration, and Local Employment Elasticities," American Economic Review, American Economic Association, vol. 108(12), pages 3855-3890, December.
    9. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    10. Grant D. Jacobsen, 2019. "Who Wins In An Energy Boom? Evidence From Wage Rates And Housing," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 9-32, January.
    11. Bailey, Michael & Gupta, Abhinav & Hillenbrand, Sebastian & Kuchler, Theresa & Richmond, Robert & Stroebel, Johannes, 2021. "International trade and social connectedness," Journal of International Economics, Elsevier, vol. 129(C).
    12. Pelzl, Paul & Poelhekke, Steven, 2021. "Good mine, bad mine: Natural resource heterogeneity and Dutch disease in Indonesia," Journal of International Economics, Elsevier, vol. 131(C).
    13. Carluccio, Juan & Cuñat, Alejandro & Fadinger, Harald & Fons-Rosen, Christian, 2019. "Offshoring and skill-upgrading in French manufacturing," Journal of International Economics, Elsevier, vol. 118(C), pages 138-159.
    14. Anna Gumpert, 2018. "The Organization of Knowledge in Multinational Firms," Journal of the European Economic Association, European Economic Association, vol. 16(6), pages 1929-1976.
    15. Batista Cátia & Potin Jacques, 2015. "International specialization and the return to capital," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 467-508, July.
    16. Hanwei Huang & Jiandong Ju & Vivian Z. Yue, 2017. "Structural adjustments and international trade: theory and evidence from China," CEP Discussion Papers dp1508, Centre for Economic Performance, LSE.
    17. Güzin Bayar, 2018. "Estimating export equations: a survey of the literature," Empirical Economics, Springer, vol. 54(2), pages 629-672, March.
    18. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    19. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    20. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2010. "Intermediaries in International Trade: direct versus indirect modes of export," LEM Papers Series 2010/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    21. Artal-Tur, Andrés & Castillo-Giménez, Juana & Llano-Verduras, Carlos & Requena-Silvente, Francisco, 2011. "The factor content of regional bilateral trade: The role of technology and demand," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 157-172, April.

    More about this item

    Keywords

    manufacturing; exports; energy prices; shale gas;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:66410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.