The Local Economic and Welfare Consequences of Demand Shocks for Coal Country
Paper Number: 2025-03
Document Date: 10/2025
Author(s): Daniel Kraynak
JEL Classification: H72, J23, Q32, Q40, L71
Keywords: Coal, coal country, labor markets, distributional impacts
Abstract: This paper estimates the welfare costs of declining coal demand from the power sector on coal mining regions of the US. Using an instrumental variable derived from a stylized model of the electricity sector, I estimate that coal producers shed jobs and wages primarily in coal mining and adjacent industries. In-migration, home values, and public education expenditures also decline. Applied in a spatial equilibrium framework, my estimates imply about $0.85 billion in costs to coal country residents resulting from a net decline of $8.03 billion in thermal coal production value from 2007-2017.
This paper is part of the Environmental Economics Working Paper Series.
The Local Economic and Welfare Consequences of Demand Shocks for Coal Country (pdf)