Does mineral development provide a basis for sustainable economic development?

Abstract

The extraction of non-renewable resources is broadly viewed as an unsustainable activity. After 60+ years of examining the role of non-renewable resource development in broader economic development, and its implications for economic welfare, there is little consensus on its effects–or even its desirability. This paper examines the issue of sustainability in the context of non-renewable mineral resources which, we argue, is entwined with the mineral extraction industry‘s “boom-bust” and “resource curse” images. We present a standard Solow-style economic growth model that integrates mineral endowment and uses the model to examine the mineral blessing or curse question empirically with a cross-section of countries. The model is tested using several econometric techniques that generally support the mineral blessing hypothesis. On the question of sustainability, we contrast the applicability of the concept in the contexts of renewable and non-renewable resource development. In the former case, the concept of sustainable yield is relatively straightforward. In the latter, the concept is much more difficult to apply. Sustainable development of non-renewable resources depends on factors beyond physical rates of production, such as governance and investment in human and physical capital.