The role of political-industry nexus in promoting illegal extraction of mineral resources and deforestation: A case of iron ore mining in Goa

Abstract

Mining of mineral resources entails significant deforestation in developing countries. The large financial rewards associated with mining create corrupt linkages between the government regulators and mining industry, often resulting in illegal extraction of minerals in environmentally sensitive areas. We develop a model of political-industry corrupted relationship to explore the problem of illegal mining of iron ore and its impact on deforestation in Goa, India. For the regulator, the decision to allow illegal extraction and relaxation from environmental remediation requirement is made with the objective of accumulating illegal wealth while simultaneously mitigating the risks of political ouster and conviction. Results suggest that several factors, such as the relative risks of political survival and conviction, the degree of impatience displayed by the regulator as well as the contribution of the mining sector to the economy, play a role in influencing the extent of illegal mining activity. When the regulator faces a low risk of political ouster, an increase in conviction risk may not provide enough deterrence to illegal mining, resulting in high levels of deforestation.