Intensive and Extensive Margins of Mining and Development: Evidence from Sub-Saharan Africa

What are the economic consequences of mining in Sub-Saharan Africa? Using a panel of 3,635 districts from 42 Sub-Saharan African countries for the period 1992 to 2012 we investigate the effects of mining on living standards measured by night-lights. Night-lights increase in mining districts when mineral production expands (intensive margin), but large effects approximately equivalent to 16% increase in GDP are mainly associated with new discoveries and new production (extensive margin). We identify the effect by carefully choosing feasible but not yet mined districts as a control group. In addition, we exploit giant and major mineral discoveries as exogenous news shocks. In spite of the large within district effects, there is little evidence of significant spillovers to other districts reinforcing the enclave nature of mines in Africa. Furthermore, the local effects disappear after mining activities come to an end which is consistent with the ’resource curse’ view.