Author ORCID Identifier

https://orcid.org/0000-0001-7282-9406

Year of Publication

2022

Degree Name

Doctor of Philosophy (PhD)

Document Type

Doctoral Dissertation

College

Business and Economics

Department/School/Program

Economics

First Advisor

Dr. Ana María Herrera

Abstract

My dissertation consists of three papers on the response of various economic indicators to crude oil shocks. In the first paper, I investigate the Western Australian gasoline market for asymmetric responses in gasoline prices to changes in input costs, otherwise known as the rockets and feathers hypothesis. This theory states that after a positive cost shock, firms will swiftly increase their retail prices to consumers; after a decrease in input costs, however, they take longer to adjust and lower prices. Using daily, establishment level data, I estimate a multi-stage error correction model and find evidence of asymmetric price adjustment in the long-run adjustment process. I do not, however, find significant evidence in the short-run dynamics. Of particular interest in this market is that the regional firms transition to a uniform price cycle within the sample. I find that changes in pricing patterns and market conduct can impact the long-run relationship in downstream gasoline markets, which may -in turn- affect estimates obtained from traditional error correction models.

While the crude oil and retail gasoline markets are naturally integrated, shocks in crude oil can have large repercussions to the overall macroeconomy. An unex- pected increase in crude oil price affects the costs of production for many manu- facturing industries. As such, it is important to investigate whether these shocks have an impact on the employment in such industries. My second paper uses quar- terly, establishment-level data from the Census Bureau to construct job flows for the United States from 1980 to 2016. Combined with recent data on oil news shocks, I investigate the effect of unexpected shocks to oil news on job reallocation. I find that oil news shocks have significant effects on job creation and destruction rates, with the effects varying across industries. Furthermore, the automobile subsectors experience economically and statistically significant increases in labor reallocation following an oil news shock. I find that responses vary across some firm characteristics, such as level of capital investment, indicating that precautionary motives may be a possible transmission channel.

There is a large body of literature that has investigated the changes in the labor market that occurred in the 1970s, however the impact of the 1973 and 1979 oil shocks has received less scrutiny. In my third paper, I inquire into the long-term decline in employment and earnings of unskilled young men since 1973. Using county level data, I combine variation at the industry and commuting zone level to identify the long-run impact of oil shocks on key demographic groups. I find that young low-education males experienced significant decreases in labor market outcomes, particularly when compared to older males, younger females, and young males with higher levels of education. When accounting for the importance of oil in industry production and differential effect for demand driven industries, similar results can be seen.

Digital Object Identifier (DOI)

https://doi.org/10.13023/etd.2022.296

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