Guidelines for conducting economic impact studies on fracking

A properly conducted economic impact analysis can be valuable. It can quantify how an entity affects the economy for a defined region, which may be of interest to a number of stakeholders.  Each day, new economic impact studies are released, showing the impact of universities, sports stadiums, airports, rivers, or other entities.  These studies, if done well, could be useful to policy makers and other officials.

Unfortunately, many economic impact studies are flawed.  The lack of a peer review process may be the biggest problem.  When most academic studies are published, the initial drafts are first reviewed by other experts in the field.  These experts are usually not known to the author and often have the power to prevent a bad paper from being published.  At a minimum, reviewers can insist on changes to improve the paper prior to publication.  The peer review process helps provide some quality control.  Most economic impact studies are not reviewed in this manner, however.  The result can be studies that are either intentionally or unintentionally misleading. Many of these studies, when released into the public domain, have their estimates promoted by media outlets.

In this paper, we focus on the economic impact of fracking.  Fracking is a technique used to fracture rock layers to extract natural gas.  In the past decade, fracking has become widespread in the United States.  Similarly, in the past few years, there have been over a dozen studies released to the public examining the economic impact of fracking.  While the general guidelines on how to conduct economic impact studies should be well known, the estimates for the economic impact of fracking vary significantly across studies.   

We will summarize the economic impact studies done on fracking in the United States and critically examine the assumptions made in these various studies.  We’ll also review some of the idiosyncrasies researchers may run into when estimating the economic impact of fracking that aren’t problems when estimating the economic impact of other entities.   We also provide our recommendations for best practices to follow when conducting an economic impact study on fracking.  Our paper should be important both to researchers and policymakers.