On the comparative advantage of U.S. manufacturing: evidence from the shale gas revolution

Working paper

This paper provides novel empirical evidence of the effects of a plausibly exogenous change in relative factor prices on United States manufacturing production and trade. The shale gas revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world reflecting differences in endowment of difficult to trade natural gas. Guided by economic theory, empirical tests on output, factor reallocation and international trade are conducted. Results show that U.S. manufacturing exports have grown by about 10 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.

Authors: Arezki, R; Fetzer, T; Pisch, F

• Publication status: Published
• Publisher: University of Oxford
• Series: OxCarre Papers
• Publication date: 2016-01-25
• Paper number: 167
• Keywords: shale gas; exports; manufacturing; energy prices