Coal mine closures double job losses in Appalachia

A Philadelphia Fed working paper finds that coal mine closures in Appalachia between 2011 and 2016 significantly increased local unemployment and reduced jobs, wages, and output. The study estimates a job loss multiplier of 2.0.

Appalachia's economic fallout from coal shock

A Philadelphia Fed working paper reveals the pronounced economic decline in Appalachian counties following coal mine closures between 2011 and 2016.

During this period, active mines in Appalachia fell by 54 percent, and coal mine employment dropped by 57 percent.

Counties with closures experienced significant adverse effects: payroll employment decreased by 4 percent, wages and salaries by 8 percent, and gross domestic product (GDP) by 14 percent.

The unemployment rate increased by 0.9 percentage points.

These negative impacts worsened by 2021 across most variables, except the unemployment rate, which fell due to a shrinking labor force.

The study identifies a job-loss multiplier of 2.0, meaning two jobs were lost for every coal job lost.

This is substantially higher than the 1.35 multiplier from the 1980s coal bust, attributed to a rising local wage premium for coal workers, which nearly doubled from 53 percent in 1986 to 102 percent in 2011.

Job losses were concentrated in mining and related service industries.

Shale boom's ripple effect on coal

The decline in U.S. coal production, particularly in Appalachia, was triggered by falling natural gas prices during the mid-2000s shale gas boom.

This led power plants to switch from coal to natural gas, creating a negative demand shock for thermal coal.

The research design leverages quasi-random variation in exposure to this shock, focusing on 120 Appalachian counties with active coal mines since 2000.

Using difference-in-differences event study regressions, the study identifies 81 'treated' counties with at least one mine closure between 2011-2016, comparing them to 39 'control' counties with no net closures.

The identifying assumption posits that mine closures were due to topographic and geologic features affecting productivity, not local economic characteristics, ensuring a valid counterfactual.

A stark warning for energy transitions

This study vividly illustrates the severe and persistent local economic damage from rapid energy transitions, particularly in regions heavily reliant on a single industry.

The amplified job-loss multiplier underscores that market forces alone are insufficient to mitigate profound social costs, necessitating proactive policy interventions.

These findings offer crucial lessons for policymakers navigating future climate-driven structural changes, emphasizing the need for robust support mechanisms.