Spill-Overs of a Resource Boom: Evidence from Zambian Copper Mines

Do local populations bene t from resource booms? How strong are market linkages between the mining sector and the regional economy? This paper exploits exogenous variation in mine-level production volumes generated by the recent copper boom in Zambia to shed light on these questions. Using a novel dataset, I nd robust evidence that an increase in local copper production improves living standards in the surroundings of the mines even for households not directly employed in the mining sector: a 10% increase in constituency-level copper output is associated with a 2% increase in real household expenditure; positive effects on housing conditions, consumer durable ownership and child health are of similar magnitude. The positive spill-overs extend to the rural hinterland of mining cities, neighboring constituencies, and constituencies on the copper transportation route. Additionally, I identify boom-induced changes in the demand for services and agricultural products as key channels through which the urban and rural populations benefit from the mine expansions. Since the boom failed to generate fiscal revenues, these effects can be interpreted as the result of the mines' backward linkages. Taken together, these findings highlight the welfarepotential of local procurement policies in resource rich developing countries.