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Extractive Industries, Price Shocks and Criminality

Author

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  • Sebastian Axbard
  • Anja Benshaul-Tolonen
  • Jonas Poulsen

Abstract

A large literature has highlighted the potential detrimental effects of natural resource wealth on social, economic and political outcomes. We study a previously largely unexplored relationship - the impact of natural resource wealth on criminal activity. Our empirical strategy exploits price fluctuations in 15 internationally traded minerals to study the impact of mineral wealth on local crime levels in South Africa - leveraging detailed crime data from 1,084 police precincts over 10 years. We find that increased mineral wealth leads to a reduction in criminal activity. An exploration of mechanisms suggest that the effect is due to changes in employment opportunities created by the mining industry, affecting the opportunity cost of engaging in criminal activity. Consistent with this we also document that results are driven by property crime and that mines are less likely to close down when prices are high. Our results suggest that downward shifts in international mineral prices can cause surges in crime. To investigate how resilience against such surges can be achieved, we exploit the roll-out of a government employment guarantee program and document that the program reduces the crime response to changes in international mineral prices.

Suggested Citation

  • Sebastian Axbard & Anja Benshaul-Tolonen & Jonas Poulsen, 2019. "Extractive Industries, Price Shocks and Criminality," OxCarre Working Papers 220, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:220
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    File URL: https://ora.ox.ac.uk/objects/uuid:5995aa67-0bc1-43fe-8945-9236e72d1314
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    Citations

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    Cited by:

    1. Anja Tolonen, 2019. "Endogenous Gender Roles: Evidence from Africa’s Gold Mining Industry," OxCarre Working Papers 209, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    2. Soares, Rodrigo R. & Souza, Danilo, 2023. "Too Much of a Good Thing: Accelerated Growth and Crime," IZA Discussion Papers 16002, Institute of Labor Economics (IZA).
    3. Eva-Maria Egger & Michael Keller & Jorge Mouco, 2021. "The socioeconomic impact of coal mining in Mozambique," WIDER Working Paper Series wp-2021-108, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Extractive Industries; Mining; Crime;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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