Mining Impact on the Municipal Development in Brazil, 2000-2010

Abstract

The environmental disasters in the mining sector and the water crisis of 2014-2016 raised questions about the economic and social cost-benefit of this activity due to its ambiguous character: high income generating capacity whilst inherently complex, risky, and cause of negative externalities. This paper evaluates the impact of mining on the Municipal Human Development Index and income inequality, in Minas Gerais and Pará, 2000 and 2010. For this purpose, pairing techniques and spatial econometrics are used to control effects related to the locational rigidity characteristic of the sector. Results: positive average effects in the MHDI are restricted to the host municipalities, that is, without spillovers to the neighborhood. This could be considered undesirable given the finiteness of natural resources, the allocation of part of the mineral royalties to the states, and exposure to the risk of potential environmental disasters. No significant effects on inequality are found.