Mining away the Preston curve

Abstract

I estimate the long-term national health and education impacts of having a larger mining share in the economy. By instrumenting the relative size of the mining sector with the natural geological variation in countries' fossil fuel endowments, I provide evidence suggestive of a causal relationship. The findings suggest that countries with larger mining shares tend to have poorer health and education outcomes than countries with similar per capita incomes, geographic characteristics, and institutional quality. Doubling the mining share of an economy corresponds to, on average, the infant death rate being 20% higher, life expectancy being 5% lower, total years of education being 20% lower, and 70% more people having no formal education. Divergences from the Preston curve-the concave relationship between cross-country income and life expectancy that has long been of interest to economists, demographers, and epidemiologists-are thus partly explained by the size of the mining sector. Within-country evidence from Indonesia paints a similar picture. My results provide support for a growing body of evidence linking mining to poorer average living standards, particularly vis-à-vis other types of income. I also estimate the effects of national mining dependence on non-mining income, health and education investment, and institutions.