The Local Human Capital Costs of Oil Exploitation

Abstract

This paper explores the impacts of oil exploitation on human capital accumulation at the local level in Colombia, a resource-rich developing country. We provide evidence based on detailed spatial and temporal data on oil exploitation and education, using the number of wells drilled as an intensity treatment at the school level. To find causal estimates we rely on an instrumental variable approach that exploits the exogeneity of international oil prices and a proxy of oil endowments at the local level. Our results indicate that oil has a negative impact on human capital since it reduces enrollment in higher education. Furthermore, it generates a delay in the decision to enroll in higher education and leads students to prefer technical areas of study and programs in social science, business, and law. However, we do not find any effects on quality or tertiary education completion. Our results are robust to a number of relevant specification changes and we stress the role of local markets and spillovers as the main transmission channel. In particular, we find that higher oil production causes an increase in formal wages but that there is no premium to tertiary education enrollment.

Digging Deep: Resource Exploitation and Higher Education

“…Our paper also adds to the literature on natural resources and the link between extractive industries and human capital (Cascio and Narayan, 2022;Rickman et al, 2017;Mejía, 2020;Balza et al, 2021;Mosquera, 2022;Acuna et al, 2022). Most of these analyses use within-country variation and focus on primary or secondary education, with only a few exploring effects on higher education (Emery et al, 2012;Rickman et al, 2017;Yamada et al, 2018;Balza et al, 2021;Mosquera, 2022;Acuna et al, 2022). We contribute to this body of work by employing individual-level variation, which allows us to proxy for factors known to affect an individual's decision to pursue or finish higher education, such as ability (Arcidiacono, 2004;DesJardins et al, 2006); financial aid (Dynarski, 2000(Dynarski, , 2003Bettinger et al, 2019); school or college quality (Light and Strayer, 2000;Deming et al, 2014); and high school socioeconomic context (Finnie et al, 2005).…”

“…Our paper also adds to the literature on natural resources and the link between extractive industries and human capital (Cascio and Narayan, 2022;Rickman et al, 2017;Mejía, 2020;Balza et al, 2021;Mosquera, 2022;Acuna et al, 2022). Most of these analyses use within-country variation and focus on primary or secondary education, with only a few exploring effects on higher education (Emery et al, 2012;Rickman et al, 2017;Yamada et al, 2018;Balza et al, 2021;Mosquera, 2022;Acuna et al, 2022).…”

Local Socieconomic Impacts of Large-scale Mining Projects in Ecuador: The Case of Fruta del Norte

“…In addition, the authors find that in districts where a mine was present, there was a higher probability of the occurrence of violent conflicts. Also concerned with the noneconomic effects of mining, Balza et al (2021) explores the impact of oil extraction in Colombia on education levels across the country through the use of temporal and spatial data. Specifically, the authors identify the number of wells drilled as the treatment to demonstrate the accumulation of human capital at the local level.…”

From Secondary School to the Labor Market in Colombia: Turning Barriers into Building Blocks

“…In this study, we employ a two-stage least squares (2SLS) estimator to systematically address these issues. To do so, we utilize the price index for metals from the IMF (PETA) interacted with the number of mines within a 1 km radius of schools in the year preceding the start of their operation plus one, similar to the approach used by Balza et al (2021); Black et al (2005); Bonilla Mejía (2020); Dube and Vargas (2013) and Michaels (2011). This interaction serves as an instrumental variable, representing a proxy for the supply of mines per school, to quantify the probability of the mines commencing operations.…”

“…The model is based on models used by Balza et al (2021) and Bonilla Mejía (2020). I estimate the impact of mining activity on educational and labor market outcomes using information from the mines that are located near secondary schools.…”