Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 09/2015: Mining and Local Corruption in Africa

Andreas Kotsadam (), Eivind Hammersmark Olsen (), Carl Henrik Knutsen and Tore Wig
Additional contact information
Andreas Kotsadam: Dept. of Economics, University of Oslo, Postal: Department of Economics and ESOP, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Eivind Hammersmark Olsen: Dept. of Economics, University of Oslo, Postal: Department of Economics and ESOP, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Carl Henrik Knutsen: Department of Political Science, University of Oslo
Tore Wig: Department of Political Science, University of Oslo

Abstract: We investigate whether mining affects local-level corruption in Africa. Several cross-country analyses report that natural resource production and wealth have adverse effects on political institutions, for instance by increasing corruption, whereas other country-level studies show no evidence of such "political resource curses". These studies face well-known endogeneity and other methodological issues, and employing alternative designs and micro-level data would allow for drawing stronger inferences. Hence, we connect 90,000 survey respondents in four Afrobarometer survey waves to spatial data on about 500 industrial mines. Using a difference-in-differences strategy, we find evidence that mining increases bribe payments. Mines are initially located in less corrupt areas, but mining areas turn more corrupt after mines open and actively produce. A closer study of South Africa - using even more precise spatial matching of mines and survey respondents - corroborates the continent-wide results. Hence, mineral production is, indeed, a "curse" to local institutions.

Keywords: Resource curse; corruption; minerals; mining

JEL-codes: D73; Q32; Q33

41 pages, April 30, 2015

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