This paper investigates the asymmetric response of gasoline prices to changes in input costs, otherwise known as the rockets and feathers hypothesis. Using daily data for Western Australia, I estimate a multi-level error correction model (ECM) to investigate the relationship between upstream and downstream prices. Estimation results for the full sample uncover evidence of asymmetry in the long-run relationships between crude oil and pay-at-pump prices as well as wholesale and pay-at-pump prices, but no evidence in the short-run dynamics. Furthermore, the fact that firms adopt a uniform price cycle within the sample allows me to explore how changes in pricing patterns and market institutions affect the ECM estimates. Indeed, evidence of rockets and feathers is found for the pre-tacit collusion sample but not after firms adopt a uniform price cycle.
The Impact of Oil Shocks on Labor Reallocation: Disentangling the Supply and Demand Side Effects using Disaggregated Data (with Ana María Herrera)
Earlier investigations into the effect of oil price shocks on the creation and destruction of U.S. manufacturing jobs assumed that oil price shocks had similar effects regardless of their source. Yet, shocks to the real oil price that stem from changes in oil supply or global demand have been shown to have a very different effect on U.S. economic activity. Using quarterly establishment-level data from the Census Bureau from 1980 to 2016 to construct job flows, we disentangle the effect of demand and supply driven shocks on job reallocation. Initial results indicate each shock has different effects on job creation and destruction, with the effects varying over time. Not surprisingly, the magnitude and persistence of the response varies across industries.
Oil Shock and Watershed: The 1974 Recession and the Labor Market Fortunes of Low-Skill American Males (with Ana María Herrera and Geoffrey Williams)
We investigate the long-term decline in employment and earnings of unskilled young men since 1973, specifically looking at the effect of structural changes brought about by the early 1970’s oil price shocks. Using county level data from the County Business Patterns and the Local Area Personal Income (LAPI), we follow Autor, Dorn, and Hanson (2016) and combine variation at the industry and commuting zone level to identify the long-run impact of the oil shocks on key demographic groups. Initial results show that our model works very well to predict changes in the labor market and provide a solid framework for inquiring into the mechanisms driving the changes in long-run labor outcomes.