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

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  • 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
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    File URL: http://hdl.handle.net/2077/2739
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    Cited by:

    1. 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).
    2. 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.
    3. 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.
    4. Akpalu, Wisdom & Anders, Ekbom, 2010. "The Bioeconomics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries," RFF Working Paper Series dp-10-07-efd, Resources for the Future.
    5. 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.
    6. 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.
    7. 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).
    8. 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.
    9. 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.
    10. 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.

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    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

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