An Economic Impact Report of Shale Gas Extraction in Pennsylvania with Stricter Assumptions

During the onset of shale gas development, a variety of economic impact studies were released through the ‘gray literature’ without formal peer review. In a review of six such impact reports, Kinnaman (2011) speculates about several major issues worth scrutiny arising with analysis using input-output models. His central critique focuses on the assumptions of how industry spending is represented and how leasing and royalty dollars are spent. In this study, we use detailed county records and results from a survey to directly address these assumptions, and compare our results to the findings in an economic impact study of Marcellus Shale development in Pennsylvania which Kinnaman critiqued. Our results, which are only about 52% of the prior study, confirm his supposition that some ex ante studies use unrealistic assumptions which lead to gross overestimates of the impacts.