Zusammenfassung:
To assess the effects of an oil price bust on individual labor market outcomes, we leverage the 2015 exogenous decline in international oil prices with geographical variation in oil-dependency in Ecuador. To account for propagation mechanisms, we also test the causal effect of the oil price bust on public transfers to local autonomous governments. Reduced form results suggest a moderate oil price pass-through channel on wages and nonlabor earnings but not on labor supply and participation. Public transfers play an amplification role, as a one percentage point decrease in these funds implies workers in oil-dependent areas to experience a wage reduction of 1.5%. Spillover effects to nonextractive industries, with reduced economic activity at the firm level, seem to be the transmission channels explaining the drop in individual earnings during the oil price bust.