Socioeconomic Impact of Mining Activity: Effects of Gold Mining on Local Communities in Tanzania and Mali

Abstract

The effect of extractive activity on economic growth and development is a long debated issue in economics literature. While most of the existing literature focuses on the macroeconomic impacts of natural resource abundance, there is a rather limited but growing strand of literature that studies the local economy impact of extractive activity using micro data. This paper aims to contribute to this literature by providing new evidence on the effects of gold mining in two resource-rich African countries: Tanzania and Mali.

We utilize a rich data set collected from various sources and apply a differences-in-differences estimation strategy to see whether individuals/households geographically close to mines, are affected differently from the opening of mines. We look at a number of outcome variables including various measures of children’s health indicators, households’ access to facilities, and women and men’s employment status. The first part of the analysis is at the household/individual level where the data is kept and treatment is defined at. As a second attempt, we aggregate the data up to the district level by using the appropriate poverty mapping techniques and apply Abadie et al. (2010)’s Synthetic Control Group method to study whether mining districts behave differently from non-mining districts after mines start operation.

We reach different conclusions for the two case countries. In the case of Tanzania, we show that households in the immediate mining catchment area are negatively affected from extractive activity whereas this effect becomes positive when we consider households that are located in neighboring and further away catchment areas. In the case of Mali, any significant positive impact of mining activity is on those households who are located closer to the mines. Those households, who are still in the catchment area but further away from the mine, are either not affected or negatively affected from mining activity.

Keywords: Economic Development, Local Economy, Extractive Industries, Poverty, Poverty Mapping, Gold Mining, Africa, Tanzania, Mali, Differences-in-Differences, Synthetic Control Group.

JEL Classification: I31, I32, Q32