Oil price fluctuations and employment in Kern County: A Vector Error Correction approach

Kern County is one of the country's largest oil producing regions, in which the oil industry employs a significant fraction of the labor force in the county. In this study, the short- and long-run effects of oil price fluctuations on employment in Kern County are investigated using a Vector Error Correction model (VECM). Empirical results over the period 1990:01 to 2015:03 suggest long-run causality running from both WTI and Brent oil prices to employment. No causality is detected in the short-run. Kern County should formulate appropriate policies, which take into account the fact that changes in oil prices have long-term effects on employment rather than short term.