Mining and corruption

This study examines the links between mineral dependency and corruption. Specifically, it develops a cross-section econometric model that estimates the effects of per capita income, fuel exports, non-fuel exports, and average per unit value of mineral exports on corruption. The results indicate that fuel and non-fuel mineral exports affect corruption differently. Corruption increases with fuel exports in an unambiguous manner. Non-fuel mineral exports tend to increase corruption only in poor countries, particularly affecting those exporting high value mineral commodities such as diamonds and gold. In richer countries, non-fuel mineral exports actually reduce corruption. In addition, while economic development reflected by rising per capita income ultimately reduces corruption, the evidence indicates that at early stages of development, advances in per capita income are associated with greater corruption. These findings suggest that the links between corruption on the one hand and mineral dependency and per capita income on the other are far more complex than widely recognized. (C) 2007 Elsevier Ltd. All rights reserved.