Date of Award

May 2019

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Rebecca M Neumann

Committee Members

Narayan K Kishor, Laura E Grant, Hamid Mohtadi

Abstract

Possession and production of energy resources affects the host country's wealth. This dissertation considers the effects of technological and policy shocks that originate in the energy sector and the implications they create for the host country's international financial flows, environment, and wealth of population groups.

In Chapter 1, I model how the decisions made upon an oil discovery by the country's firms and households impact the current account. I use a small open economy DSGE model with an oil sector to express the current account as a function of oil discoveries. In this model, an oil discovery creates a realistic long-term borrowing-repayment-saving cycle.

Three characteristics of the economy affect oil-related decisions: the presence of an oil fund, the equity home bias, and technological rigidity of the oil industry. I estimate the effects of these characteristics as structural parameters in the model using the North Sea data for Norway and the United Kingdom.

I find that the presence of an oil fund amplifies the current account surpluses. The equity home bias determines how quickly the country consumes its international savings. Rigidity of the oil firms delays the accumulation of international savings and prolongs the country's time in debt.

In Chapter 2, I explore the environmental implications of the energy sector. How will a carbon tax affect construction of electricity generators and carbon emissions in the US?

I model the construction choice in two parts: the decision to build and the capacity size. Because a carbon tax has yet to be implemented in the US, I proxy for the tax using variation of fuel prices. I simultaneously estimate the two-part construction outcomes for each state. I find that a hypothetical state-level tax of $10 slows the state's construction of new, dirty gas capacity by 3 percent, relative to the business-as-usual growth of gas generation. As hypothesized, other estimates indicate that a tax would have a null effect on clean wind capacity in the near-term.

For policy perspective, I predict the effects of carbon taxes ranging from $10 to $100 per ton CO2. In an average state, a tax could reduce average emissions from newly built generators by 3 to 33 percent.

Development of shale technology made available large quantities of oil and gas in the US that were previously too costly to recover. In Chapter 3, I develop an approach for examining wealth implications of shale oil and gas. This approach focuses on how the benefits from shale oil are distributed across different economic groups: landowners, oil firms, and state and local, national, and international population. To help find the speed with which the benefits spread from the oil and gas sector to the general economy, I develop a method to obtain the responses of incomes and other key macroeconomic indicators to the production of oil and gas in a multi-state DSGE model with an oil sector.

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