“…In contrast, our assumption that the world oil price is exogenous at the state level requires significantly less credulity. 4 We should note several papers that have investigated state or regional heterogeneity in the responses to oil-price shocks, although none is adequate for addressing our questions: Three have applied VARs to a handful of states and allowed for positive oil-price shocks only (Bhattacharya, 2003;Iledare and Olatubi, 2004;Penn, 2006). Others merely imputed state effects from industry-level results rather than looking at actual states (Brown and Yücel, 1995;Davis, Loungani, and Mahidhara, 1997), while still others have derived regional effects from measures of resource dependence (Brown and Hill, 1988).…”