The Local Economic Impacts of Natural Resource Extraction

Abstract

Whether it is fair to characterize natural resource wealth as a curse is still debated. Most of the evidence derives from cross-country analyses, providing cases both for and against a potential resource curse. Scholars are increasingly turning to within-country evidence to deepen our understanding of the potential drivers, and outcomes, of resource wealth effects. Moving away from cross-country studies offers new perspectives on the resource curse debate and can help overcome concerns regarding endogeneity. Therefore, scholars are leveraging datasets that provide greater disaggregation of economic responses and exogenous identification of impacts. This article surveys the literature on these studies of local and regional effects of natural resource extraction. We discuss data availability and quality, recent advances in methodological tools, and the main findings of several research areas. These areas include the direct impact of natural resource production on local labor markets and welfare, the effects of government spending channels resulting from mining revenue, and regional spillovers. Finally, we take stock of the state of the literature and provide suggestions for future research.

A conceptual model of the socioeconomic impacts of unconventional fossil fuel extraction

“…Unconventional shale gas is already extracted in substantial volumes at the Marcellus and Barnett shales of the USA, with growing or foreseen production in many countries across the globe which have rich endowments. Figure 1 shows the potential footprint of unconventional energy extraction and how it overlaps with established human settlements and croplands, demonstrating the potential conflict that may arise when resource governance issues and potential compensation are not planned for carefully (Cust and Poelhekke, 2015).…”

“…Of particular interest has been a focus on how the socioeconomic effects (both positive and negative) are distributed between local and state scales, which are likely to vary on a case-by case basis (Barth, 2013). For these reasons, concerns have been raised about the potential for asymmetrically allocating the costs and benefits of extractive industries across regions in what some consider to be a 'within country' resource curse effect (Cust and Poelhekke, 2015). In this paper we extend this body of thinking by firstly synthesising knowledge on the regional impacts of energy extraction in general, then proceeding to consider how regional impacts are playing out differently in the context of conventional compared with unconventional fossil fuels, drawing on a review of the rapidly-emerging body of case studies, many of which have been published since Barth's (2013) exploratory review.…”

Natural resource extraction and political trust

“…Only mines listed by the USGS as active are considered. A benefit of the USGS data is that it provides the geographic coordinates of a mine, although the information on actual mining activity can be limited (Cust and Poelhekke, 2015). To atone for this problem, the status of unknown mines was confirmed in the Mineral and Locality (2014) database.…”

The Basilicata Wealth Fund: Resource Policy and Long-Run Economic Development in Southern Italy

“…The next step is simulating the series A bwf t for the BWF as given in the reduced form shown in (6), which is a function of actual royalty revenues R t and which incorporates the …scal spending rule g bwf t given in (2) 4 . The time series for the BWF can be plotted as follows: As it is shown in Figure 2, allocation of royalty revenues to the BWF drives the exponential growth of …nancial wealth accumulated in A bwf t up until the depletion year, from which the amount of wealth accumulated stays constant (as predicted in section 2:1).…”

“…In other words, this paper aims at contributing to the growing literature of within-country political economy of natural resources, recently surveyed by Cust and Poelhekke (2015).…”