Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts

May 19, 2017
By Jason P. Brown, Research and Policy Officer


Research Working PaperHow are consumers responding to local income shocks as a result of booms and busts in oil and gas development?

Local shocks in oil and gas development may lead consumers to increase their spending. Using quarterly information on consumer debt and oil and gas activity between 2000 and 2016, I find that consumer debt increased at a peak of $840 per capita, equivalent to 1.7 percent of median household income in counties with shale endowment and increased drilling. Shocks to local wages via drilling revealed a marginal propensity to consume from debt of 0.45. Relative to areas with oil and gas development experience, the marginal propensity to consume was 70 percent larger in previously undeveloped areas.

Download paper, RWP 17-05, May 2017; Revised March 2018

JEL Classification: D23, Q32, Q33, R11

Article Citation

  • Brown, Jason P. 2017. “Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts.” Federal Reserve Bank of Kansas City, Research Working Paper 17-05, May. Available at https://doi.org/10.18651/RWP2017-05

Related Research

  • Brown, Jason P., Timothy Fitzgerald, and Jeremy G. Weber. 2016.  “Does Resource Ownership Matter? Oil and Gas Royalties and Local Income Growth.” Federal Reserve Bank of Kansas City, Research Working Paper 16-12, November.
  • Brown, Jason P., Timothy Fitzgerald, and Jeremy G. Weber. 2016. “Capturing Rents from Natural Resource Abundance: Private Royalties from U.S. Onshore Oil & Gas Production.” Federal Reserve Bank of Kansas City, Research Working Paper 15-04, July.