Most modern mines in the developing world are located in rural areas, where agriculture is the main source of livelihood. This creates the potential of negative spillovers to farmers through competition for key inputs (such as land) and environmental pollution. To explore this issue, we examine the case of gold mining in Ghana. Through the estimation of an agricultural production function using household level data, we find that mining has reduced agricultural productivity by almost 40%. This result is driven by polluting mines, not by input availability. Because of its crowding out effects on agriculture, we find that the mining activity is associated with an increase in poverty, child malnutrition and respiratory diseases. A simple cost-benefit analysis shows that the fiscal contribution of mining would not have been enough to compensate affected populations.
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