A closer look at potential distortions in state real gross domestic product: The case of the Texas energy sector

Article type: Research Article

Authors: Phillips, Keith^{a; *} | Hernandez, Raul^a | Scheiner, Benjamin^a

Affiliations: [a] Research Department, Federal Reserve Bank of Dallas – San Antonio Branch, San Antonio, TX, USA

Correspondence: [*] Corresponding author: Keith Phillips, Research Department, Federal Reserve Bank of Dallas – San Antonio Branch, 402 Dwyer Avenue, San Antonio, TX 78204, USA. Tel.: +1 210 978 1409; E-mail: [email protected]

Abstract: In this paper we take a closer look at a potential flaw in the measurement of Texas Real Gross Domestic Product (RGDP) – value added in the oil and gas industry. BEA estimates of Texas RGDP in oil and gas extraction have a negative correlation with factors of production and units of output. In this paper we use several different approximations of RGDP in oil and gas extraction to see which seems to be a good substitute for the BEA estimates. We find that a measure based on changes in Texas physical production of oil and gas results in an estimate of total state RGDP that is more highly correlated with Texas job growth and closer to the correlation of these measures nationally. This adjusted measure of Texas RGDP should be a better measure of Texas economic performance.

Keywords: Industry RGDP, value added, oil and gas extraction, regional data

DOI: 10.3233/JEM-140384

Journal: Journal of Economic and Social Measurement, vol. 39, no. 1-2, pp. 105-119, 2014