Three essays on the effects of oil prices on state economies /

Abstract

This dissertation consists of three chapters that examine the effects of oil prices on state economies. The first chapter, "Asymmetric Effects of Oil Prices on State Economies," examines the impact of oil price changes on state-level income growth. I find strong evidence of asymmetry in the impacts of oil prices and that states vary considerably in terms of sensitivity to oil price shocks. Further analysis shows that states with a higher prevalence of manufacturing and higher coal production are more likely to be negatively affected by positive oil price shocks, while states with a high prevalence of petroleum and natural gas production tend to benefit from positive oil price shocks. The second chapter, "Regime-Switching Analysis of a State Economy's Response to An Oil Price Shock," analyzes the effects of oil price changes on state economies using a smooth transition autoregressive (STAR) approach. States are shown to present differences in both the tolerance and speed of response to an oil price shock. The differences are further explained by state-specific economic characteristics. The third chapter, "Multivariate Unobserved Component Analysis of State Employment with Oil Price Volatility," investigates whether and how oil price volatility affects state employment, with a focus on regional similarities and differences. Results show that oil price volatility has significant negative impacts on most states. Further, states with a higher prevalence of motor vehicle production are likely to experience larger job losses during periods of high oil price volatility.