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Natural resource use conflict: gold mining in tropical rainforest in Ghana

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  • AKPALU, WISDOM
  • PARKS, PETER J.

Abstract

Gold is frequently mined in rainforests that can provide either gold or forest benefits, but not both. This conflict in resource use occurs in Ghana, a developing country in the tropics where the capital needed for mining is obtained from foreign direct investment (FDI). We use a dynamic model to show that an ad valorem severance tax on gross revenue can be used to internalize environmental opportunity costs. The optimal tax must equal the ratio of marginal benefits from forest use to marginal benefits from gold extraction. Furthermore, the tax should increase (decrease) when adjusted net return on all other assets in the economy is higher (lower) than the growth in the price of gold. Empirical results suggest that the 3 per cent tax rate currently used in Ghana is too low to fully represent the external cost of extraction (i.e., lost forest benefits).

Suggested Citation

  • Akpalu, Wisdom & Parks, Peter J., 2007. "Natural resource use conflict: gold mining in tropical rainforest in Ghana," Environment and Development Economics, Cambridge University Press, vol. 12(1), pages 55-72, February.
    • Handle: RePEc:cup:endeec:v:12:y:2007:i:01:p:55-72_00
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    Cited by:

    1. Ocquaye, Nathaniel, 2023. "Explaining the persistence of illegal Chinese mining in Ghana: the efficacious role of local patrons," LSE Research Online Documents on Economics 116681, London School of Economics and Political Science, LSE Library.
    2. Akpalu, Wisdom & Anders, Ekbom, 2010. "Bio-economics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries," Working Papers in Economics 431, University of Gothenburg, Department of Economics.
    3. Magambo, Isaiah & Dikgang, Johane & Gelo, Dambala & Tregenna, Fiona, 2021. "Gold-Mining Pollution Exposure, Health Effects and Private Healthcare Expenditure in Tanzania," MPRA Paper 108800, University Library of Munich, Germany.
    4. Wisdom Akpalu & Worku T. Bitew, 2017. "Externalities and foreign capital in aquaculture production in developing countries," WIDER Working Paper Series wp-2017-1, World Institute for Development Economic Research (UNU-WIDER).
    5. Andrews, Nathan, 2018. "Land versus livelihoods: Community perspectives on dispossession and marginalization in Ghana's mining sector," Resources Policy, Elsevier, vol. 58(C), pages 240-249.
    6. Akpalu, Wisdom & Vondolia, Godwin K., 2012. "Bioeconomic model of spatial fishery management in developing countries," Environment and Development Economics, Cambridge University Press, vol. 17(2), pages 145-161, April.
    7. Ousman Gajigo & Emelly Mutambatsere & Guirane Samba Ndiaye, 2012. "Working Paper 147 - Gold Mining in Africa-Maximizing Economic Returns for Countries," Working Paper Series 378, African Development Bank.
    8. Wisdom Akpalu & Worku T. Bitew, 2017. "Externalities and foreign capital in aquaculture production in developing countries," WIDER Working Paper Series 001, World Institute for Development Economic Research (UNU-WIDER).
    9. Akpalu, Wisdom & Normanyo, Ametefee K., 2017. "Gold Mining Pollution and the Cost of Private Healthcare: The Case of Ghana," Ecological Economics, Elsevier, vol. 142(C), pages 104-112.
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    11. Akpalu, Wisdom, 2020. "Optimal Allocation of Anchovy Stocks as Baitfish for Tuna and Food for Local Communities in Developing Coastal Countries," EfD Discussion Paper 20-14, Environment for Development, University of Gothenburg.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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