IDEAS home Printed from https://ideas.repec.org/p/hhs/gunwpe/0182.html
   My bibliography  Save this paper

Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana

Author

Listed:
  • Akpalu, Wisdom

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Parks, Peter J.

    (Department of Agricultural Economics and Marketing, Cook College,)

Abstract

Gold is frequently mined in rainforests that can provide either gold or forest benefits, but not both. This conflict in resource use occurs in Ghana, a developing country in the tropics where the capital needed for mining is obtained from foreign direct investment (FDI). We use a dynamic model to show that an ad valorem severance tax on gross revenue can be used to internalize environmental opportunity costs. The optimal tax must equal the ratio of marginal benefits from forest use to marginal benefits from gold extraction. Over time, this tax must change at a rate equal to the difference between the discount rate and the rate of change in the price of gold. Empirical results suggest that the 3 percent tax rate currently used in Ghana is too low to fully represent the external cost of extraction (i.e., lost forest benefits).

Suggested Citation

  • Akpalu, Wisdom & Parks, Peter J., 2005. "Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana," Working Papers in Economics 182, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0182
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2077/2739
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeffrey A. Krautkraemer, 1988. "The Cut-Off Grade and the Theory of Extraction," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 146-160, February.
    2. Fraser, Rob W., 1999. "An analysis of the Western Australian gold royalty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(1), pages 1-16, March.
    3. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    4. M. R. Caputo, 1998. "Economic Characterization of Reciprocal Isoperimetric Control Problems," Journal of Optimization Theory and Applications, Springer, vol. 98(2), pages 325-350, August.
    5. Tsikata, Fui S., 1997. "The vicissitudes of mineral policy in Ghana," Resources Policy, Elsevier, vol. 23(1-2), pages 9-14, June.
    6. Simpson, R David & Sedjo, Roger A & Reid, John W, 1996. "Valuing Biodiversity for Use in Pharmaceutical Research," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 163-185, February.
    7. James Benhin & Edward Barbier, 2004. "Structural Adjustment Programme, Deforestation and Biodiversity Loss in Ghana," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(3), pages 337-366, March.
    8. Ehui, Simeon K. & Hertel, Thomas W. & Preckel, Paul V., 1990. "Forest resource depletion, soil dynamics, and agricultural productivity in the tropics," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 136-154, March.
    9. M. R. Caputo, 1999. "Economic Characterization of Reciprocal Isoperimetric Control Problems Revisited," Journal of Optimization Theory and Applications, Springer, vol. 101(3), pages 723-730, June.
    10. Camille Bann, 1997. "An Economic Analysis of Tropical Forest Land Use Options, Ratanakiri Province, Cambodia," EEPSEA Research Report rr1997112, Economy and Environment Program for Southeast Asia (EEPSEA), revised Nov 1997.
    11. Löfgren, Åsa, 2003. "Habit Formation in the Environmental Quality: Dynamic Optimal Environmental Taxation," Working Papers in Economics 92, University of Gothenburg, Department of Economics.
    12. Doherty, Neil A & Posey, Lisa Lipowski, 1997. "Availability Crises in Insurance Markets: Optimal Contracts with Asymmetric Information and Capacity Constraints," Journal of Risk and Uncertainty, Springer, vol. 15(1), pages 55-80, October.
    13. Addy, Samuel N, 1998. "Ghana: revival of the mineral sector," Resources Policy, Elsevier, vol. 24(4), pages 229-239, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ocquaye, Nathaniel, 2023. "Explaining the persistence of illegal Chinese mining in Ghana: the efficacious role of local patrons," LSE Research Online Documents on Economics 116681, London School of Economics and Political Science, LSE Library.
    2. Akpalu, Wisdom & Anders, Ekbom, 2010. "Bio-economics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries," Working Papers in Economics 431, University of Gothenburg, Department of Economics.
    3. Magambo, Isaiah & Dikgang, Johane & Gelo, Dambala & Tregenna, Fiona, 2021. "Gold-Mining Pollution Exposure, Health Effects and Private Healthcare Expenditure in Tanzania," MPRA Paper 108800, University Library of Munich, Germany.
    4. Wisdom Akpalu & Worku T. Bitew, 2017. "Externalities and foreign capital in aquaculture production in developing countries," WIDER Working Paper Series wp-2017-1, World Institute for Development Economic Research (UNU-WIDER).
    5. Andrews, Nathan, 2018. "Land versus livelihoods: Community perspectives on dispossession and marginalization in Ghana's mining sector," Resources Policy, Elsevier, vol. 58(C), pages 240-249.
    6. Akpalu, Wisdom & Vondolia, Godwin K., 2012. "Bioeconomic model of spatial fishery management in developing countries," Environment and Development Economics, Cambridge University Press, vol. 17(2), pages 145-161, April.
    7. Ousman Gajigo & Emelly Mutambatsere & Guirane Samba Ndiaye, 2012. "Working Paper 147 - Gold Mining in Africa-Maximizing Economic Returns for Countries," Working Paper Series 378, African Development Bank.
    8. Wisdom Akpalu & Worku T. Bitew, 2017. "Externalities and foreign capital in aquaculture production in developing countries," WIDER Working Paper Series 001, World Institute for Development Economic Research (UNU-WIDER).
    9. Akpalu, Wisdom & Normanyo, Ametefee K., 2017. "Gold Mining Pollution and the Cost of Private Healthcare: The Case of Ghana," Ecological Economics, Elsevier, vol. 142(C), pages 104-112.
    10. Elaine Lawson & Gloria Bentil, 2014. "Shifting sands: changes in community perceptions of mining in Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(1), pages 217-238, February.
    11. Akpalu, Wisdom, 2020. "Optimal Allocation of Anchovy Stocks as Baitfish for Tuna and Food for Local Communities in Developing Coastal Countries," EfD Discussion Paper 20-14, Environment for Development, University of Gothenburg.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akpalu, Wisdom & Vondolia, Godwin K., 2012. "Bioeconomic model of spatial fishery management in developing countries," Environment and Development Economics, Cambridge University Press, vol. 17(2), pages 145-161, April.
    2. Hilson, Gavin, 2002. "Harvesting mineral riches: 1000 years of gold mining in Ghana," Resources Policy, Elsevier, vol. 28(1-2), pages 13-26.
    3. Folmer, Henk & van Kooten, G. Cornelis, 2006. "Deforestation," Working Papers 37035, University of Victoria, Resource Economics and Policy.
      • Henk Folmer & G. Cornelis van Kooten, 2006. "Deforestation," Working Papers 2006-06, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    4. Pereira, Vijay & Tuffour, James & Patnaik, Swetketu & Temouri, Yama & Malik, Ashish & Singh, Sanjay Kumar, 2021. "The quest for CSR: Mapping responsible and irresponsible practices in an intra-organizational context in Ghana’s gold mining industry," Journal of Business Research, Elsevier, vol. 135(C), pages 268-281.
    5. L. Grosset & B. Viscolani, 2006. "Reciprocal Optimal Control Problems and the Associated Pareto Frontier," Journal of Optimization Theory and Applications, Springer, vol. 130(1), pages 113-123, July.
    6. Andrews, Nathan, 2016. "Challenges of corporate social responsibility (CSR) in domestic settings: An exploration of mining regulation vis-à-vis CSR in Ghana," Resources Policy, Elsevier, vol. 47(C), pages 9-17.
    7. Savin Treanţă, 2022. "Lagrange-Hamilton Approach in Optimization Problems with Isoperimetric-Type Constraints," Journal of Optimization Theory and Applications, Springer, vol. 194(2), pages 508-520, August.
    8. Guang Li & Desmond Ato Koomson & Jingyu Huang & Ebenezer Impriam Amponsah & Williams Kweku Darkwah & Nicholas Miwornunyuie & Ke Li & Xiaohang Dong, 2021. "A review from environmental management to environmental governance: paradigm shift for sustainable mining practice in Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(7), pages 9710-9724, July.
    9. Yelpaala, Kaakpema & Ali, Saleem H., 2005. "Multiple scales of diamond mining in Akwatia, Ghana: addressing environmental and human development impact," Resources Policy, Elsevier, vol. 30(3), pages 145-155, September.
    10. Cairns, Robert D. & Van Quyen, Nguyen, 1998. "Optimal Exploration for and Exploitation of Heterogeneous Mineral Deposits," Journal of Environmental Economics and Management, Elsevier, vol. 35(2), pages 164-189, March.
    11. van Soest, D.P. & Jepma, C., 1997. "Certification and tropical deforestation : Micro monitoring without macro conditions?," Other publications TiSEM 08cd0fd1-f5e5-4054-96a7-b, Tilburg University, School of Economics and Management.
    12. Muhammad Tufail & Ather Maqsood Ahmed & Shahzad Alvi, 2021. "Conservation of forest through provision of alternative sources of income; evidence from rural households in Northern Pakistan," Journal of Forest Science, Czech Academy of Agricultural Sciences, vol. 67(1), pages 36-50.
    13. Tuokuu, Francis Xavier Dery & Gruber, James S. & Idemudia, Uwafiokun & Kayira, Jean, 2018. "Challenges and opportunities of environmental policy implementation: Empirical evidence from Ghana's gold mining sector," Resources Policy, Elsevier, vol. 59(C), pages 435-445.
    14. Abdul-Gafaru Abdulai, 2017. "Competitive clientelism and the political economy of mining in Ghana," Global Development Institute Working Paper Series esid-078-17, GDI, The University of Manchester.
    15. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    16. Burda, Michael C. & Zessner-Spitzenberg, Leopold, 2024. "Greenhouse Gas Mitigation and Price-Driven Growth in a Solow-Swan Economy with an Environmental Limit," IZA Discussion Papers 16771, Institute of Labor Economics (IZA).
    17. Dale W. Henderson & Stephen W. Salant, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
    18. Hala Abu-Kalla & Ruslana Rachel Palatnik & Ofira Ayalon & Mordechai Shechter, 2020. "Hoard or Exploit? Intergenerational Allocation of Exhaustible Natural Resources," Energies, MDPI, vol. 13(24), pages 1-20, December.
    19. Brausmann, Alexandra & Bretschger, Lucas, 2018. "Economic development on a finite planet with stochastic soil degradation," European Economic Review, Elsevier, vol. 108(C), pages 1-19.
    20. John Baffes & Cristina Savescu, 2014. "Monetary conditions and metal prices," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 447-452, May.

    More about this item

    Keywords

    Optimal taxation; Efficiency; Externality; Dynamic analysis; Firm behaviour;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica Oscarsson (email available below). General contact details of provider: https://edirc.repec.org/data/naiguse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.