Where do jobs go when oil prices drop?

Ana María Herrera, Mohamad B. Karaki, Sandeep Kumar Rangaraju

Research output: Contribution to journalArticlepeer-review

38 Scopus citations


In this paper, we estimate a factor augmented vector autoregressive (FAVAR) model to investigate the effect of oil price shocks on total private job flows as well as on industry-level job creation and destruction. Following an unexpected oil price drop in the first year, we find that in oil and gas extraction and support activities for mining exhibit a reduction in job creation and an increase in job destruction. Instead, industries in construction, manufacturing and services exhibit an increase in the net employment change. An unexpected decline in the real oil price slows down the pace of gross job reallocation. We demonstrate that the increase (decrease) in private job destruction (creation) observed during the first year is primarily driven by the response of closing (expanding) firms in services and manufacturing.

Original languageEnglish
Pages (from-to)469-482
Number of pages14
JournalEnergy Economics
StatePublished - May 2017

Bibliographical note

Publisher Copyright:
© 2016


  • Job flows
  • Job reallocation
  • Oil prices

ASJC Scopus subject areas

  • Economics and Econometrics
  • General Energy


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