The Macro-Economic Impact Of Mineral Exporting Sector On A Developing Economy

In this chapter we identify and attempt to qualify the direct and indirect links that the mineral exporting sector has with other economic activity in a developing country. We find that the traditional macroeconomic models used for analysis in developed countries may not be appropriate for some developing countries because the effective constraints and linkages between sectors are significantly different. Keynesian macroeconomic models would lead us to expect that the principal channel for the mining sector’s impact on aggregate economic activity would be through its direct expenditures on labor, materials and transport services. To the extent that unemployed resources characterize these markets, an expansion of mining activities will generate additional income. Real income may be further increased when the income created initially is spent on domestic goods that are also produced with inputs that would otherwise be unemployed. In the case of Bolivia, which may be typical of many other less developed countries, we find that this linkage between the mining sector and the rest of the economy is relatively less important than three other ways in which the mining sector interacts with the rest of the economy.