Abstract:

Using data on oil and gas endowment and patent applications at the US county level, we provide novel evidence that oil and gas booms spur local innovation outside the oil and gas sector. The effect is driven by IPC patent classes that appear comparatively close to oil and gas such as mechanical engineering, while patenting in other technology classes is not significantly affected. These results speak against Dutch Disease effects in which a booming natural resource sector crowds out non-resource innovation, but instead highlight previously unknown positive effects to be considered in policy debates on the future of fossil fuels. In terms of mechanisms, additional evidence speaks against a local finance channel: oil and gas booms lead to a rise in local bank deposits, but innovation does not rise by more in counties where financial constraints are generally more prevalent.

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