Extractive Industries, Production Shocks and Criminality: Evidence from a Middle-Income Country
Publisher: Center for Effective Global Action
Author(s): Sebastian Axbard, Jonas Poulsen, and Anja Tolonen
Date: 2015
Topics: Extractive Resources
Countries: South Africa
Extractive industries are key to development in many countries, accounting for large shares of government revenue and GDP. However, there is a vast and growing literature that links extractive industries to conflicts and war in countries with weak institutions. We are, to our knowledge, the first to investigate whether extractive industries can cause economic and violent crime. We focus on South Africa, a country with a significant mining industry and high levels of criminality. We exploit time and geographic variation, in addition to fluctuations in international mineral prices, in a fixed effects and an instrumental variables approach. In contrast to earlier findings on other forms of social conflict, we find that areas endowed with higher levels of natural resources show no increase in crime when a mine opens. However, the closure of a mine leads to a large and significant increase in both property and violent crime. Subsequently, we show that the migration flows and income opportunities created by the mining industry are two important channels through which mining affect criminality.