The effect of natural resource abundance on income of local labor markets

Abstract

This master thesis contributes to the literature on the effect of natural resource abundance on regional level outcomes in Norway. We aim to analyze the causal effect of an onshore petroleum facility (OPF) approval on average income of labor markets that were allocated an OPF, and whether labor markets within commuting distance to the OPF experience any spillover effects on their average income. The identification strategy is of a generalized difference-in-difference setup, exploiting the rollout of onshore petroleum facilities between 1965 and 1992. The sample consists of all municipalities in Norway in 2016, and the time period comprises 1957 to 2008. The results of this thesis show no significant effect of an OPF approval on average income in labor markets where an OPF is established, while spillover effects increase average income of surrounding labor markets by 3.2 per cent. Extending the analysis, we find that an OPF approval led to a rise in average income of 3.4 per cent in labor markets with an OPF during the 2000s. Similarly, spillover effects from OPFs increased average income by 3.9 per cent in surrounding labor markets during the 1980s. We also find that the unemployment rate increases by 0.4 per cent following approval in labor markets where the OPF is located, and insignificant spillover effects onto unemployment in surrounding labor markets.