Coal Mining and the Resource Curse in the Eastern United States

WP: We measure the effect of resource sector dependence on long run income growth using the natural experiment of variation in coal endowments in a set of 409 relatively U.S. counties selected for homogeneity. Using a panel data set that extends over two separate boom and bust cycles (1970-2010), we find that coal dependence significantly reduces growth of per capita county income over the long run. These estimates indicate that a one standard deviation increase in the measure of resource intensity results in an estimated 0.7 percentage point drop in average annual growth rates. We also measure the extent to which the Appalachian coal resource curse operates by providing disincentives to education, and find that the education channel explains only about 15% to 40% of the curse.