Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties

By Jason P. Brown, Assistant Vice President and Economist , Timothy Fitzgerald and Jeremy G. Weber


Download paper, RWP 16-12, November 2016; Revised May 2017

The recent oil and gas production boom in the contiguous United States generated tens of billions in additional royalty income for owners of oil and gas rights. We use the royalty income shock to study the local multiplier effect of unanticipated income and find that each royalty dollar received by county residents created an additional $0.50 in local income, mostly through greater wage income. The finding suggests that royalty payments and government transfers have similar local multiplier effects. In aggregate, the total income effect from royalties was $68 billion in 2014, or 0.5 percent of U.S. personal income. Over the 2000 to 2014 period, royalty income and its multiplier effect accounted for more than two-thirds of the local income effect of oil and gas development. The estimates help explain why the income effects of drilling may vary widely across regions based on patterns of resource ownership.

JEL Classification: D23, Q32, Q33, R11

Article Citation

  • Brown, Jason P., Timothy Fitzgerald, and Jeremy G. Weber. 2016. “Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties”. Federal Reserve Bank of Kansas City, Research Working Paper 16-12, November. Available at https://doi.org/10.18651/RWP2016-12

Related Research

  • Brown, Jason P., Timothy Fitzgerald, and Jeremy G. Weber. 2015. “Capturing Rents from Natural Resource Abundance: Private Royalties from U.S. Onshore Oil & Gas Production”. Federal Reserve Bank of Kansas City, Research Working Paper 15-04, July.

About the Author

Jason Brown is a senior economist and regional executive in the Regional Affairs Department of the Federal Reserve Bank of Kansas City. He conducts research on issues related to regional economic growth, emerging industries, and structural change in regional industry and labor markets. Read his bio.