The Heterogeneous Local Labour Effects of Mining Booms

Using two rounds of population census for 1043 districts in Peru I document that large-scale mining activity had a positive effect on local employment over 14 years. The effect is differentiated by industry, skill and migration status. Employment grew by 0.04 percentage points faster by one standard deviation increase in the mineral prices. Both high and low skilled workers enjoyed similar employment increase, however only low skilled workers experienced a decline in unemployment. Using data from 10 annual household surveys I find that, consistent with a model of heterogeneous firms and labor, wages for low skilled workers in districts close to the mining activity was 0.05 percentage points higher by every standard deviation increase in the index of mineral prices. Additional evidence with the census data suggests that locals working in the mining or the agricultural sector filled the new employment opportunities. More evidence suggests that mobility costs and not the elasticity of substitution between high and low skilled workers or skill acquisition may explain the outcome. Together these findings suggest that large-scale mining activity increases the demand for mining and agricultural local employment, and the wages in the local economy.