The Effect of the Mining Sector on Developing Economies

There has been much debate about the contribution of the mining sector to economic development in developing countries, though multi-country empirical studies have been very limited. Vector-autoregression models are used to determine the contribution of the mining sector to economic development in nineteen developing countries. Impulse response functions estimate the multiplier of mining output on non-mining GDP, net foreign factor payments, imports, manufactured capital, and human capital. The results indicate that in the majority of countries, the mining sector contributes little or nothing to GNP and factor accumulation. In a few countries, however, mining does contribute to economic development.