IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v107y2018icp151-162.html
   My bibliography  Save this article

Natural resource sector FDI, government policy, and economic growth: Quasi-experimental evidence from Liberia

Author

Listed:
  • Bunte, Jonas B.
  • Desai, Harsh
  • Gbala, Kanio
  • Parks, Bradley
  • Runfola, Daniel Miller

Abstract

Governments use a variety of policies to increase the impact of foreign investment on economic growth. An increasingly popular policy is to require that foreign companies provide public goods near the communities where their commercial investments are sited. This approach seeks to crowd in additional investments, create clusters of interconnected firms, and set in motion economic agglomeration processes. Post-2006 Liberia represents an ideal empirical setting to test the effectiveness of this approach. We construct a new dataset that measures the precise locations of 557 natural resource concessions granted to investors. We then merge these data with a remotely sensed measure of nighttime light growth at the 1 km × 1 km grid cell level and analyze it using a matched difference-in-differences strategy. We find heterogeneous treatment effects across sectors and investor types: mining (specifically iron-ore) investments projects have positive growth effects, while agriculture and forestry investment projects do not; furthermore, concessions granted to Chinese investors have positive growth effects while those given to U.S. investors do not. These patterns of heterogeneous treatment effects across sectors and investor types are consistent with the theory of change underpinning the government’s development corridor strategy.

Suggested Citation

  • Bunte, Jonas B. & Desai, Harsh & Gbala, Kanio & Parks, Bradley & Runfola, Daniel Miller, 2018. "Natural resource sector FDI, government policy, and economic growth: Quasi-experimental evidence from Liberia," World Development, Elsevier, vol. 107(C), pages 151-162.
    • Handle: RePEc:eee:wdevel:v:107:y:2018:i:c:p:151-162
    DOI: 10.1016/j.worlddev.2018.02.034
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X18300792
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.worlddev.2018.02.034?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nils B Weidmann & Sebastian Schutte, 2017. "Using night light emissions for the prediction of local wealth," Journal of Peace Research, Peace Research Institute Oslo, vol. 54(2), pages 125-140, March.
    2. Fernando M. Arag?n & Juan Pablo Rud, 2013. "Natural Resources and Local Communities: Evidence from a Peruvian Gold Mine," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 1-25, May.
    3. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, vol. 53(1), pages 205-222, February.
    4. David Mayer, 2001. "The long-term impact of health on economic growth in Mexico, 1950-1995," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(1), pages 123-126.
    5. Tom Bundervoet & Laban Maiyo & Apurva Sanghi, 2015. "Bright Lights, Big Cities," World Bank Publications - Reports 22922, The World Bank Group.
    6. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
    7. Williamson, John, 2000. "What Should the World Bank Think about the Washington Consensus?," The World Bank Research Observer, World Bank, vol. 15(2), pages 251-264, August.
    8. Holger Görg & Eric Strobl, 2016. "Spillovers from Foreign Firms through Worker Mobility: An Empirical Investigation," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT, chapter 13, pages 243-259, World Scientific Publishing Co. Pte. Ltd..
    9. Walker, M.I. & Minnitt, R.C.A., 2006. "Understanding the dynamics and competitiveness of the South African minerals inputs cluster," Resources Policy, Elsevier, vol. 31(1), pages 12-26, March.
    10. Fernando M. Aragón & Juan Pablo Rud, 2016. "Polluting Industries and Agricultural Productivity: Evidence from Mining in Ghana," Economic Journal, Royal Economic Society, vol. 126(597), pages 1980-2011, November.
    11. Mayer, David, 2001. "The Long-Term Impact of Health on Economic Growth in Latin America," World Development, Elsevier, vol. 29(6), pages 1025-1033, June.
    12. Fernando M. Aragón & Juan Pablo Rud, 2016. "Polluting Industries and Agricultural Productivity: Evidence from Mining in Ghana," Economic Journal, Royal Economic Society, vol. 126(597), pages 1980-2011.
    13. World Bank, 2012. "Chinese FDI in Ethiopia," World Bank Publications - Reports 26772, The World Bank Group.
    14. Kotsadam, Andreas & Tolonen, Anja, 2016. "African Mining, Gender, and Local Employment," World Development, Elsevier, vol. 83(C), pages 325-339.
    15. Barry Sautman & Hairong Yan, 2015. "Localizing Chinese Enterprises in Africa: from Myths to Policies," HKUST IEMS Thought Leadership Brief Series 2015-05, HKUST Institute for Emerging Market Studies, revised Feb 2015.
    16. Chuhan-Pole,Punam & Dabalen,Andrew L. & Kotsadam,Andreas & Sanoh,Aly & Tolonen,Anja Karolina & Chuhan-Pole,Punam & Dabalen,Andrew L. & Kotsadam,Andreas & Sanoh,Aly & Tolonen,Anja Karolina, 2015. "The local socioeconomic effects of gold mining : evidence from Ghana," Policy Research Working Paper Series 7250, The World Bank.
    17. AfDB AfDB, . "Africa Competitiveness Report 2013," Africa Competitiveness Report, African Development Bank, number 456, October.
    18. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    19. Bloch, Robin & Owusu, George, 2012. "Linkages in Ghana's gold mining industry: Challenging the enclave thesis," Resources Policy, Elsevier, vol. 37(4), pages 434-442.
    20. Thomas D. Cook & William R. Shadish & Vivian C. Wong, 2008. "Three conditions under which experiments and observational studies produce comparable causal estimates: New findings from within-study comparisons," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 724-750.
    21. Kosuke Imai & Gary King & Elizabeth A. Stuart, 2008. "Misunderstandings between experimentalists and observationalists about causal inference," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(2), pages 481-502, April.
    22. Ho, Daniel E. & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2007. "Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference," Political Analysis, Cambridge University Press, vol. 15(3), pages 199-236, July.
    23. Boliang Zhu, 2017. "MNCs, Rents, and Corruption: Evidence from China," American Journal of Political Science, John Wiley & Sons, vol. 61(1), pages 84-99, January.
    24. World Bank, 2010. "Liberia - Employment and Pro-Poor Growth," World Bank Publications - Reports 2966, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nguyen, Canh Phuc & Su, Thanh Dinh, 2021. "Economic integration and economic complexity: The role of basic resources in absorptive capability in 40 selected developing countries," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 609-625.
    2. Castet, Antoine, 2024. "The impact of large-scale land acquisitions on child food insecurity in Africa," World Development, Elsevier, vol. 179(C).
    3. Gräser, Melanie, 2023. "Industrial versus artisanal mining: The effects on local employment in Liberia," Department of Economics Working Paper Series 341, WU Vienna University of Economics and Business.
    4. Melanie Gräser, 2023. "Industrial versus artisanal mining: The effects on local employment in Liberia," Department of Economics Working Papers wuwp341, Vienna University of Economics and Business, Department of Economics.
    5. Daniel Runfola & Geeta Batra & Anupam Anand & Audrey Way & Seth Goodman, 2020. "Exploring the Socioeconomic Co-benefits of Global Environment Facility Projects in Uganda Using a Quasi-Experimental Geospatial Interpolation (QGI) Approach," Sustainability, MDPI, vol. 12(8), pages 1-13, April.
    6. Dreher, Axel & Fuchs, Andreas & Hodler, Roland & Parks, Bradley C. & Raschky, Paul A. & Tierney, Michael J., 2021. "Is Favoritism a Threat to Chinese Aid Effectiveness? A Subnational Analysis of Chinese Development Projects," World Development, Elsevier, vol. 139(C).
    7. Juergen Bitzer & C. Dannemann & Erkan Goeren, 2024. "Heterogeneous Effects of Forgein Aid on Local Economic Development," Working Papers V-448-24, University of Oldenburg, Department of Economics, revised Dec 2024.
    8. Yang, Yujeong, 2022. "Bring Your Own Workers: Chinese OFDI, Chinese overseas workers, and collective labor rights in Africa," World Development, Elsevier, vol. 152(C).
    9. Liu, Min & Xu, Wenli & Zhang, Hangyu & Chen, Huang & Bie, Qiang & Han, Guodong & Yu, Xiaohua, 2022. "Livestock production, greenhouse gas emissions, air pollution, and grassland conservation: Quasi-natural experimental evidence," MPRA Paper 115704, University Library of Munich, Germany.
    10. Yuping Deng & Yanrui Wu & Helian Xu, 2022. "Emission Reduction and Value-added Export Nexus at Firm Level," Economics Discussion / Working Papers 22-19, The University of Western Australia, Department of Economics.
    11. Ahsan Kibria & Reza Oladi & Sherzod B. Akhundjanov, 2020. "Foreign direct investment and civil violence in Sub‐Saharan Africa," The World Economy, Wiley Blackwell, vol. 43(4), pages 948-981, April.
    12. Ekananda, Mahjus, 2022. "Role of macroeconomic determinants on the natural resource commodity prices: Indonesia futures volatility," Resources Policy, Elsevier, vol. 78(C).
    13. Anti, Sebastian, 2021. "Land grabs and labor in Cambodia," Journal of Development Economics, Elsevier, vol. 149(C).
    14. Das, Khanindra Ch & Mahalik, Mantu Kumar & Sadorsky, Perry, 2023. "Tax provision by international subsidiaries of Indian extractive industry multinationals: Do environmental pollution and corruption matter?," Resources Policy, Elsevier, vol. 80(C).
    15. Gao, Jing & Zeng, Yiwu & Liu, Min, 2024. "Policy interventions and market innovation in rural China: Empirical evidence from Taobao villages," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1411-1429.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Amarasinghe, Ashani & Hodler, Roland & Raschky, Paul A. & Zenou, Yves, 2024. "Key players in economic development," Journal of Economic Behavior & Organization, Elsevier, vol. 223(C), pages 40-56.
    3. Poignant, Adrian, 2023. "Small-scale mining and agriculture: Evidence from northwestern Tanzania," Resources Policy, Elsevier, vol. 83(C).
    4. Ashani Amarasinghe & Roland Hodler & Paul A. Raschky & Yves Zenou, 2018. "Spatial Diffusion of Economic Shocks in Networks," CESifo Working Paper Series 7001, CESifo.
    5. von der Goltz, Jan & Barnwal, Prabhat, 2019. "Mines: The local wealth and health effects of mineral mining in developing countries," Journal of Development Economics, Elsevier, vol. 139(C), pages 1-16.
    6. Bazillier, Remi & Girard, Victoire, 2020. "The gold digger and the machine. Evidence on the distributive effect of the artisanal and industrial gold rushes in Burkina Faso," Journal of Development Economics, Elsevier, vol. 143(C).
    7. Mamo, Nemera & Bhattacharyya, Sambit & Moradi, Alexander, 2019. "Intensive and extensive margins of mining and development: Evidence from Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 139(C), pages 28-49.
    8. De Haas, Ralph & Poelhekke, Steven, 2019. "Mining matters: Natural resource extraction and firm-level constraints," Journal of International Economics, Elsevier, vol. 117(C), pages 109-124.
    9. Elisa M. Maffioli, 2023. "The local health impacts of natural resource booms," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 462-500, February.
    10. Axbard, Sebastian & Benshaul-Tolonen, Anja & Poulsen, Jonas, 2021. "Natural resource wealth and crime: The role of international price shocks and public policy," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    11. Coulibaly, Massa & Foltz, Jeremy & Parker, Dominic & Olurotimi, Osaretin & Traoré, Nouhoum, 2024. "The effects of mining on local poverty in developing countries: Evidence from Mali," World Development, Elsevier, vol. 180(C).
    12. Aguilar-Gomez, Sandra & Benshaul-Tolonen, Anja, 2023. "The evolution and persistence of women's roles: Evidence from the Gold Rush," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 364-381.
    13. Bezzola, Selina & Günther, Isabel & Brugger, Fritz & Lefoll, Erwin, 2022. "CSR and local conflicts in African mining communities," World Development, Elsevier, vol. 158(C).
    14. Wegenast, Tim & Beck, Jule, 2020. "Mining, rural livelihoods and food security: A disaggregated analysis of sub-Saharan Africa," World Development, Elsevier, vol. 130(C).
    15. Akwasi Ampofo, 2021. "Oil at work: natural resource effects on household well-being in Ghana," Empirical Economics, Springer, vol. 60(2), pages 1013-1058, February.
    16. Konte, Maty & Vincent, Rose Camille, 2021. "Mining and quality of public services: The role of local governance and decentralization," World Development, Elsevier, vol. 140(C).
    17. Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, August.
    18. Rozo, Sandra V., 2020. "Unintended effects of illegal economic activities: Illegal gold mining and malaria," World Development, Elsevier, vol. 136(C).
    19. Anja Tolonen, 2019. "Endogenous Gender Roles: Evidence from Africa’s Gold Mining Industry," OxCarre Working Papers 209, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    20. Phoebe W. Ishak & Pierre-Guillaume Méon, 2020. "A resource-rich neighbor is a misfortune: The spatial distribution of the resource curse in Brazil," Working Papers CEB 20-001, ULB -- Universite Libre de Bruxelles.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:107:y:2018:i:c:p:151-162. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.