Abstract
The increase in the international price of commodities after the international financial crisis in 2008 produced a gold rush in the Colombian economy, making legal and illegal mining a very profitable and attractive business. The increase in the illegal exploitation of metals like gold has exacerbated violence in municipalities with an abundance of such minerals. Gold is believed to be a new engine in the Colombian conflict. This paper documents the phenomenon and quantifies the causal impact that the gold boom has had on indicators of violence such as homicides, forced displacement and massacres. We use the location of national parks, indigenous reserves and geochemical anomalies associated with the presence of gold mines as instruments for illegal mining in order to disentangle the causal effect of illegal mining on violence. By law, it is very difficult to get licenses for the extraction of gold in parks and indigenous reserves, and this might be a factor increasing the prevalence of illegal mining activities in municipalities with these features. In order to have time variation in our instruments, we interact geographical features associated with the presence of gold and illegal gold mining (which vary only at the municipal level) with the international price of gold. Our estimates indicate that the rise of illegal gold mining has caused a statistically significant increase in violence, as measured with the homicide rate and the victims of massacres. However, we do not find a significant causal effect of illegal gold mining on forced displacement. Our interpretation is that the increase in the profitability of illegal mining activities has sparked a dispute over territorial control between illegal armed groups in order to monopolize the extraction of the precious minerals. Nevertheless, illegal mining is a labor intensive activity, and this may have counteracted the incentives of illegal armed groups to displace local populations from their land.
- 1
“Heavy Metals. Hard Currencies.” The Gold & Silver Speculator, June 13, 2012, http://www.danielstrading.com/advice/dt/gold-silver-speculator/archives/The-Gold-and-Silver-Speculator_2012-06-13.pdf.
- 2
Baur and McDermott (2010) find evidence that gold represents a strong safe investment during the recent financial crisis.
- 3
Analysis from U.S. Department of Labor: Bureau of Labor Statistics – Beyond the Numbers – Gold Prices During and After the Great Recession, available at: http://www.bls.gov/opub/btn/volume-2/gold-prices-during-and-after-the-great-recession.htm.
- 4
Interview with former Minister of Mines, available at: http://www.portafolio.co/economia/objetivo-convertir-al-pais-potencia-minero-energetica.
- 5
See, for example, reports in La SillaVacía, available at: http://www.lasillavacia.com/historia/viaje-al-corazon-de-la-mineria-ilegal-en-guainia-37128 and at: http://www.lasillavacia.com/historia/los-picapiedra-de-las-farc-en-el-mapa-de-la-mineria-ilegal-36691.
- 6
The main exception is the work of Giraldo and Muñoz (2012).
- 7
Aljazeera, “Colombia’s Gold Rush” http://www.aljazeera.com/programmes/faultlines/2011/07/2011757127575176.html and Gatopardo, “El Oro es la Nueva Cocaína”, available at: http://www.gatopardo.com/ReportajesGP.php?R=114.
- 8
See Mejía and Restrepo (2012).
- 9
Dube and Vargas (2013); Rigterink(2011), among others focus on total production.
- 10
All our results are robust to clustering the errors at the municipality level and are available from the authors upon request.
- 11
Although the F-statistic reported in Table 3 lies between 2.3 and 9.1 (below the rule of thumb of 10), the p-values of the F-statistics all pass the test at reasonable significance levels.
- 12
We acknowledge that the magnitude of the difference between the OLS estimates and the IV estimates is large. However, our argument is that given the described characteristics of our instruments, our IV estimates do correct for the endogeneity present in the OLS estimates. This is precisely the argument behind the Hausman test for endogeneity, which is available from the authors upon request.
- 13
Although we do not show these results in the paper, they are available from the authors upon request.
We thank the editors and two anonymous referees for very thorough comments and suggestions, as well as Tomás González and Andrés Sarmiento, from the Ministry of Mines and Energy, for providing access to the information necessary for this research. Additionally, we acknowledge funding from Colombia’s Ministry of National Defense. Any errors are the sole responsibility of the authors.
References
Acemoglu, D., Johnson, S., Robinson, J., (2001), The Colonial Origins of Comparative Development: An Empirical Investigation, American Economic Review, vol. 91, no. 5, pp. 1369–1401.Search in Google Scholar
Angrist, J., Kugler, A., (2008), Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia, The Review of Economics and Statistics, vol. 90, no. 2, pp. 191–215.Search in Google Scholar
Aragon, F., Rud, J., (2009), The Blessing of Natural Resources: Evidence from a Peruvian Gold Mine, Working Papers 2009-014, Banco Central de ReservadelPerú.Search in Google Scholar
Arezki, R., Van der Ploeg, F., (2007), Can the Natural Resource Curse be Turned into a Blessing? The Role of Trade Policies and Institutions, IMF Working Paper 07/55.10.5089/9781451866193.001Search in Google Scholar
Auty, R., (2001), The Political Economy of Resource-Driven Growth, European Economic Review, vol. 45, pp. 839–846.Search in Google Scholar
Bannon, I., Collier, P., (2003), Natural Resources and Violent Conflict: Options and Actions, The World Bank, Washington, DC.10.1596/0-8213-5503-1Search in Google Scholar
Baur, D.G., McDermott, T.K., (2010), Is Gold a Safe Haven? International Evidence, Journal of Banking and Finance, vol. 34, pp. 1886–1898.Search in Google Scholar
Besley, T., Persson, T., (2008), The Incidence of Civil War: Theory and Evidence, CEPR Discussion Papers 7101, C.E.P.R. Discussion Papers.10.3386/w14585Search in Google Scholar
Brunnschweiler, C., Bulte, E., (2009), Natural Resources and Violent Conflict: Resource Abundance, Dependence, and the Onset of Civil Wars, Oxford Economic Papers, vol. 61, pp. 651–674.Search in Google Scholar
Caruso, R., (2010), Butter, Guns and Ice-Cream, Theory and Evidence from Sub-Saharan Africa, Defence and Peace Economics, vol. 21, no. 3, pp. 269–283.Search in Google Scholar
Collier, P., Hoeffler, A., (1998), On Economic Causes of Civil War, Oxford Economic Papers, 50, pp. 563–573.Search in Google Scholar
Collier, P., Hoeffler, A., (2005), Resource Rents, Governance, and Conflict, Journal of Conflict Resolution, vol. 49, pp. 625–633.Search in Google Scholar
Dube, O., Vargas, J., (2013), Commodity Price Shocks and Civil Conflict: Evidence from Colombia, Review of Economic Studies October 1, 2013, vol. 80, no. 4, pp. 1384–1421.Search in Google Scholar
Dunning, T., Wirpsa, L., (2004), Oil and the Political Economy of Conflict in Colombia and Beyond: A Linkages Approach, Geopolitics, vol. 9, no. 1, pp. 81–108.Search in Google Scholar
Elbadawi, I., Sambanis, I., (2002), How Much War Will We See? Explaining the Prevalence of Civil War, Journal of Conflict Resolution, vol. 46, no. 3, pp. 307–334.Search in Google Scholar
Fearon, J., Laitin, D., (2003), Ethnicity, Insurgency, and Civil War, American Political Science Review, vol. 97, no. 1, pp. 75–90.Search in Google Scholar
Gelb, A., (1988), Windfall Gains: Blessing or Curse?, Oxford University Press, New York.Search in Google Scholar
Giraldo, J., Muñoz, J., (2012), El oro y la madera en Antioquia, entre la informalidad y la ilegalidad, Universidad EAFIT, Medellin, Mimeo.Search in Google Scholar
Gutiérrez-Sanín, F., (2004), Ilegalidad y sistema político en Colombia: la agenda de Uribe Vélez, Nueva Sociedad no. 192 pp. 59–71.Search in Google Scholar
Humphreys, M., (2003), Natural Resource, Conflict, and Conflict Resolution, Paper Prepared for the Santa Fe Institute/Javeriana University ‘Obstacles to Robust NegotiatedSettlements’ Workshop, Bogota, 29–31 May.Search in Google Scholar
Iimi, A., (2006), Did Botswana Escape from the Resource Curse? IMF Working Paper, pp. 1–33.Search in Google Scholar
Larsen, R., (2006), Escaping The Resource Curse and the Dutch Disease? When and Why Norway caught up and Forged ahead of its Neighbours, American Journal of Economics and Sociology, vol. 65, no. 3, pp. 605–640.Search in Google Scholar
Lujala, P., (2010), The Spoils of Nature: Armed Civil Conflict and Rebel Access to Natural Resources, Journal of Peace Research, vol. 47, no. 1, pp. 15–28.Search in Google Scholar
Mehlum, H., Moene, K., Torvik, R., (2006), Institutions and the Resource Curse, The Economic Journal, vol. 116, no. 508, pp. 1–20.Search in Google Scholar
Mejia, D., Restrepo, P., (2013), Do Illegal Drug Markets Breed Violence? Evidence for Colombia, Bogota: Mimeo. Universidad de los Andes.Search in Google Scholar
Mikesell, R., (1997), Explaining the Resource Curse with Special Reference to Mineral-Exporting Countries, Resources Policy, vol. 23, pp. 191–199.Search in Google Scholar
Ranis, G., (1991), Towards a Model of Development, in Krause, L.B., Kim, K., (eds.), Liberalization in the Process of Economic Development, University of California Press, Berkeley, CA, pp. 59–101.Search in Google Scholar
Rigterink, A.S., (2011), Diamonds and violence in Africa. Uncovering relationships and mechanisms, MPRA Paper, University Library of Munich, Germany.Search in Google Scholar
Ross, M., (2004a), How Does Natural Resource Wealth Influence Civil War? Evidence from 13 Cases, International Organization, vol. 58, no. 1, pp. 35–67.10.1017/S002081830458102XSearch in Google Scholar
Ross, M., (2006), A Closer Look at Oil, Diamonds, and Civil War, American Political Science Review, vol. 9, pp. 265–300.Search in Google Scholar
Sachs, J., Warner, A., (1999), The Big Push, Natural Resource Booms and Growth, Journal of Development Economics, June 1999, vol. 59, no. 1, pp. 43–76.Search in Google Scholar
Sachs, J., Warner, A., (1995), Natural Resource Abundance and Economic Growth, NBER Working Papers 5398, National Bureau of Economic Research, Dec.10.3386/w5398Search in Google Scholar
Sachs, J., Warner, A., (2001), The Curse of Natural Resources, European Economic Review, May 2001, vol. 45, no. (4–6), p. 827.Search in Google Scholar
Van der Ploeg, F., (2007), Challenges and Opportunities for Resource Rich Economies, Oxford University, Mimeo, OXCARRE.Search in Google Scholar
©2014 by Walter de Gruyter Berlin Boston
