Managing decentralisation in local-level governments: Papua New Guinea

Abstract

The extractive resource sector accounts for a large share of Papua New Guinea?s output and contributes substantially to its overall volatility. Yet the sector employs only a small fraction of the country?s workforce and very few of the poor, and it has only tenuous linkages to the rest of the economy. This suggests that shocks to activity in the mining sector may have little impact on the overall level of poverty. Using a simple poverty projection framework, we find that while the mining sector was responsible for over half of the decline in GDP growth since the mid 1990s, its contribution to the increase in poverty over that time has been much smaller. We also estimate that a substantial decline in mining sector output over the next decade would increase poverty only slightly.