HKS Faculty Working Paper Details Labor Market Impacts from the Deepwater Horizon Oil Spill

August 27, 2014
By Doug Gavel

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico was the largest such spill in U.S. history. Approximately 4.9 million barrels of oil were discharged into the gulf over a period of almost four months. The spill took months to clean up and the federal government subsequently imposed a drilling moratorium and launched a massive response effort. A new Harvard Kennedy School (HKS) Faculty Research Working Paper authored by HKS Joseph Aldy provides a detailed analysis of how that series of events played out, and the disparate impacts it had upon employment and wages across the region.

"The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Oil Drilling Moratorium" is posted on the HKS Faculty Research Connection website.

"The spill and moratorium represented unexpected events in the region, and the resulting economic impacts varied within and among the Gulf states," Aldy writes. "Coastal counties and parishes were expected to bear the vast majority of the burden of these two events, while inland areas were expected to be largely unaffected."

But Aldy's analysis of the data shows that some of the predictions were incorrect.

"Despite predictions of major job losses in Louisiana resulting from these events, I find that the most oil-intensive parishes in Louisiana experienced a net increase in employment and wages. In contrast, Gulf Coast Florida counties south of the Panhandle experienced a decline in employment. Analysis of the number of business establishments, worker migration, accommodations industry employment and wages, sales tax data, and commercial air arrivals likewise show positive economic activity impacts in the oil-intensive coastal parishes of Louisiana and reduced economic activity along the non-Panhandle Florida Gulf Coast," Aldy concludes.

Aldy argues that the spill response efforts during the spring and summer of 2010 acted similar to the effect of a large fiscal stimulus, improving economic activity most particularly in Louisiana and northern Florida.

Joseph Aldy is an assistant professor of public policy at Harvard Kennedy School, a nonresident fellow at Resources for the Future, and a faculty research fellow at the National Bureau of Economic Research. His research focuses on climate change policy, energy policy, and mortality risk valuation. In 2009-10, Aldy served as the special assistant to the President for Energy and Environment, reporting through both the National Economic Council and the Office of Energy and Climate Change at the White House.

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Joseph Aldy, assistant professor of public policy

Joseph Aldy, assistant professor of public policy

"The spill and moratorium represented unexpected events in the region, and the resulting economic impacts varied within and among the Gulf states."