Tuesday, January 28, 2014
Spillovers of a Resource Boom: Evidence from Zambian Copper Mines
New OxCarre WP: Do local populations benefi t from resource booms? How strong are market linkages between the mining sector and the regional economy? This paper exploits exogenous variation in mine-level production volumes generated by the recent copper boom in Zambia to shed light on these questions. Using a novel dataset, I find robust evidence that an increase in local copper production improves living standards in the surroundings of the mines even for households not directly employed in the mining sector: a 10% increase in constituency-level copper output is associated with a 2% increase in real household expenditure; positive e ffects on housing conditions, consumer durable ownership and child health are of similar magnitude. The positive spill-overs extend to the rural hinterland of mining cities, neighboring constituencies, and constituencies on the copper transportation route. Additionally, I identify boom-induced changes in the demand for services and agricultural products as key channels through which the urban and rural populations benefi t from the mine expansions. Since the boom failed to generate fiscal revenues, these e ffects can be interpreted as the result of the mines' backward linkages. Taken together, these fi ndings highlight the welfare potential of local procurement policies in resource rich developing countries.