The distributional impacts of an energy boom in Western Canada

Abstract

In the energy-rich provinces of Western Canada, inequality rose over the past two decades while poverty declined, raising the question of whether the recent energy boom was a contributing factor. This study uses local labour market variation in energy extraction intensity to identify these distributional impacts. The growth in local outcomes attributable to the boom is found to be U-shaped and significant across all distributional segments, leading to somewhat increased local inequality aggregates and reduced local poverty. This pattern is preserved but varies across sectors, driving a large local inequality increase in energy extraction, with smaller rises and reductions in other industries. Résumé. Les effets de répartition d'un booménergétique dans l'Ouest canadien.Dans les provinces riches enénergie de l'Ouest canadien, les inégalités se sont accrues au cours des deux dernières décennies pendant que la pauvreté déclinait, sans qu'on puisse toujours dire si le booménergétiqueétait un facteur explicatif important. Cetteétude utilise un marché local du travail, soumisà des variations dans l'intensité de l'extraction de l'énergie, pour identifier les effets de répartition. On découvre que la croissance des effets locaux attribuables au boom suit un pattern en U, et est significatifà travers tous les segments de répartition. Voilà qui a menéà une inégalité quelque peu accrue dans les agrégats locaux maisà une pauvreté locale diminuée. Le pattern se répète dans tous les secteurs, mais varie selon les secteurs, ce qui enclenche un grand accroissement dans l'inégalité locale dans l'extraction de l'énergie, et des croissances et déclins plus faibles dans les autres industries.

Changes in wage inequality in Canada: An interprovincial perspective

“…This suggests there is something special about the ER sector that results in much larger spillover effects than other industrial sectors. This is also consistent with the findings of Marchand (), which are based on a more compelling research design that exploits differences in energy resources endowments across sub‐regions of the western provinces. Marchand concludes that the energy boom had spillover effects on other sectors, such as construction, business services and retail trade, and contributed to an increase in income and a decrease in poverty.…”

“…Marchand (2014) finds that the energy boom has increased inequality within the energy sector but reduced inequality in services (through spillover effects).…”

Quantifying the social equity state of an energy system: environmental and labor market equity of the shale gas boom in Appalachia

“…This is equivalent to a 9.9% (SE±1.7%) and 14.1% (SE±2.8%) decline in the poverty rates among all and top producing counties, respectively. Our findings are consistent with several other studies showing that energy booms lower the poverty rate, at least in the short-run [17,37]. It has further been shown in other studies that poverty rates increase in the long-run during resource declines; as an analog, the 1970s coal mining boom in the Appalachian region decreased poverty, but the 1980s bust reversed this reduction [38].…”

The labor market in Canada, 2000–2016

“…Although the economic effects of this boom were regionally concentrated, its impacts were large enough to have significant effects at the national level [8]. The boom "lifted all boats" and had especially large impacts on wages for those with high school education or less.…”