In the following blog post, the authors summarize the forthcoming American Journal of Political Science article titled “Mining and Local Corruption in Africa“:
Is natural resource wealth a curse or a blessing? Many scholars contend that resource extraction is associated with outcomes such as armed conflict, corruption and, more generally, bad governance. The general story goes as follows: A poor country discovers valuable natural resources, providing politicians with an easy source for rents, whereupon institutional “rot” sets in and governance is worsened. In Africa, with its vast mineral endowments, the mining industry is thus one main suspect behind poor governance outcomes.
Still, the empirical evidence for such proposed resource curses is not clear-cut due, for example, to problems of omitted variable bias in cross-country regressions and limited variation in (national-level) time series of resource measures. We tackle these methodological issues by using a different design and data than most previous studies, and ask whether mining has a causal effect on local-level corruption, a central feature of bad governance.
More specifically, we geocode and merge answers from over 100,000 Afrobarometer survey respondents with data providing the exact location and production characteristics of industrial-scale mines. This allows us to compare bribe payments in areas with a still unopened mine to areas where extraction activities are ongoing.
Our main finding is that mining substantially increases corruption in nearby villages. For example, an individual within 50 kilometers of a recently opened mine is 33% more likely to have paid a bribe the past year than a person living within 50 kilometers of mines that will open in the future. The former also pay bribes for permits more frequently, and perceive their local councilors to be more corrupt.
There are many potential reasons why having mineral extraction nearby increases corruption. First, mining could serve as a “honey pot” in attracting corrupt officials. However, we do not find any evidence of an increased influx of officials after mining starts. Second, mining might increase corruption through increasing economic activity (we establish this by using satellite images of nighttime lights to capture local economic output, see Figure 1), and increased economic activity may, more generally, increase bribe payments. However, we show that economic activity does not increase corruption in general; only in active mining areas. Hence, it seems as if mining-related economic activity—which is immobile in nature and associated with high rents—enables officials to stuff their pockets with bribes to an extent that other economic activities do not.
Our results highlight that the mining industry in Africa is a double-edged sword: It creates increased prosperity for mineral rich areas, at least in the short term. But this comes with deteriorating institutional quality. This suggests that transparency, monitoring and regulatory efforts may need to accompany expansions in the mining sector for mineral extraction to be an unambiguous blessing rather than a curse.
About the Authors: Carl Henrik Knutsen is a Professor in the Department of Political Science at University of Oslo; Andreas Kotsadam is a senior researcher at The Frisch Centre and Affiliated researcher at the Department of Economics at the University of Oslo; Eivind Hammersmark Olsen is a PhD Candidate in the Department of Economics at the University of Oslo; and Tore Wig is a post-doctoral fellow at the Department of Political Science at the University of Oslo. Their article “Mining and Local Corruption in Africa” will be published in a forthcoming issue of the American Journal of Political Science and is currently available for Early View.