The Effects of the Real Oil Price on Regional Wage Dispersion

American Economic Journal: Macroeconomics, Forthcoming

49 Pages Posted: 21 Mar 2011 Last revised: 19 Jun 2016

See all articles by Matthias Kehrig

Matthias Kehrig

Duke University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Nicolas Lehmann-Ziebarth

Northwestern University

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2016

Abstract

We find that oil supply shocks decrease average real wages, particularly skilled wages, and increase wage dispersion across regions, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil supply shocks, have counterfactual implications for the response of wage dispersion. Only an additional response in labor supply can explain this latter fact highlighting the importance of general equilibrium effects in a spatial context. We provide additional empirical evidence of regionally directed worker reallocation and housing prices consistent with our spatial model. Finally, we show that a calibrated version of our model can quantitatively match the estimated effects of oil supply shocks.

Keywords: Wage dispersion, Labor reallocation, Skill heterogeneity, Oil prices

JEL Classification: E24, J24, J31, J61

Suggested Citation

Kehrig, Matthias and Lehmann-Ziebarth, Nicolas, The Effects of the Real Oil Price on Regional Wage Dispersion (May 31, 2016). American Economic Journal: Macroeconomics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1787768 or http://dx.doi.org/10.2139/ssrn.1787768

Matthias Kehrig (Contact Author)

Duke University ( email )

237 Social Sciences
Box 90097
Durham, NC 27708-0097
United States

HOME PAGE: http://sites.google.com/site/matthiaskehrig/research

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nicolas Lehmann-Ziebarth

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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