Extractive Industries, Production Shocks and Criminality: Evidence from a Middle-Income Country* Sebastian Axbard† Jonas Poulsen‡ Anja Tolonen§ October 5, 2016 Abstract The risk of conflict over appropriable resources in contexts with low institutional quality is considered an obstacle to development. We examine if the extractive industry in South Africa affects property and violent crime, exploiting local production changes caused by fluctuations in international mineral prices. Using within-country variation in institutional quality, we show that the appropriation channel is dominated by change in the opportunity cost of crime if local institutional quality is sufficiently high. This leads to a negative relationship between mining activity and crime rates. The income opportunity channel is supported by heterogeneous find- ings by labor-intensity of production and migration. Keywords: Natural Resources, Mining, Crime, Violence JEL classification: O13, D74, K42 *We thank conference participants at ABCDA 2015 (Berkeley), CSAE 2015 (Oxford), NEUDC 2015 (Brown), APPAM 2015, Annual World Bank Conference on Land and Poverty 2016; and seminar participants at Columbia University, University of Gothenburg, and Uppsala University; as well as Niklas Bengtsson, Klaus Deininger, James Fenske, Dieter von Fintel, Randi Hjalmarsson, Amir Jina, Mikael Lindahl, June Luna, Edward Miguel, Andreea Mitrut, Eva Mork,¨ Imran Rasul and Mans˚ Soderbom¨ for valuable comments. We are also grateful to Statistics South Africa as well as the Institute for Security Studies for providing data, and Oxford Centre for the Analysis of Resource Rich Economies for access to the mineral data. †Queen Mary, University of London,
[email protected] ‡Harvard University,
[email protected] §Barnard College, Columbia University,
[email protected] 1 1 Introduction The role of extractive industries for economic development has been widely debated (van der Ploeg, 2011).