Academic journal article Journal of Regional Analysis & Policy

Does Mining Influence Rural Economic Growth?

Academic journal article Journal of Regional Analysis & Policy

Does Mining Influence Rural Economic Growth?

Article excerpt

Abstract. The influence of non-oil and gas mining (NAICS 212) activity on U.S. rural (nonmetropolitan) economic growth is modeled using a simple Barro-type growth framework. Because the type of mining examined tends to be clustered in regions of Appalachia and the Mountain West, we allow for spatial heterogeneity in the underlying growth process. We find that the global least square results suggest that higher dependency on non-oil and gas mining is associated with higher rates of income growth over the 2000 to 2011 time period. This relationship, however, varies significantly across the U.S. The positive relationship holds for much of the eastern part of the U.S., but a negative relationship is seen in parts of the Mountain West, and no relationship is observed for the Pacific West and much of the area associated with the Mississippi River Basin. Because of this spatial heterogeneity, care must be taken in making generalizations about non-oil and gas mining and rural economic growth.

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1. Introduction

The rapid expansion of oil and gas extraction in the western Appalachian Mountains (the Marcellus fields in the Appalachian Basin) and parts of North Dakota and Montana (the Bakken fields in the Wil- liston Basin), through the process of hydraulic frac- turing, or "fracking", has renewed widespread in- terest in mining as a rural economic growth strategy. This "gold rush" mentality has spilled over to other parts of the rural U.S., such as parts of Wisconsin, Minnesota, and Iowa, where frack sands (sand crys- tals such as quartz/silica or sandstone), which are required proppants used to "prop" open under- ground cracks from which gas or oil is extracted, are in wide supply. Given the depth of the "Great Re- cession" and slow recovery, these economic oppor- tunities are being promoted by both mine develop- ers and many local residents as a source of well- paying jobs regardless of any potential negative con- sequences.

The transition from extractive based industries (e.g., agriculture, mining, and forestry) to non- extractive based activities (e.g., recreation, tourism, and amenity-driven migration1) has raised tension in many of these rural communities (Barieri and Valdivia, 2010; English, Marcouiller, and Cordell, 2000; Marcouiller, Clendenning, and Kedzior, 2002; Ward, 2011). Power and Barrett (2001) eloquently argue that this transition from extractive to non- extractive industries has changed not only the eco- nomic base of many rural communities, but also their self-identity. An additional layer is the strong sense of private property rights among land and mineral rights owners. In many rural areas, particu- larly more remote areas, land use regulations, if pre- sent, are limited. As such, the draw to return to more traditional extractive-based industries is strong in many communities.

It is not clear, however, whether the promotion of mining is a viable economic growth strategy for the rural U.S. Under the designation of the "re- source curse" (Humphreys, Sachs, and Stiglitz, 2007) or "Dutch Disease" there is a growing literature which suggests that sustainable economic growth from resource extraction activities should be consid- ered the exception rather than a general rule (Ross, 1999; Sachs and Warner, 1999; Watts, 2005; Rosser, 2006; Bridge, 2008). Humphreys, Sachs, and Stiglitz (2007) observe that in the international development literature mineral resource extraction as a mode of regional development has become a "pariah". Yet, in the U.S. the promises of high-valued mineral leas- es to land owners and an abundance of well-paying mining jobs have spurred many rural communities into promoting mining "at all costs".

This study adds to a small, but growing, U.S.- focused literature which seeks to better understand the impact of mining on rural economies. While there is a robust literature within sociology examin- ing the socioeconomic ramifications of mining with- in the context of social disruption theory (see Freudenburg and Wilson (2002) for an excellent re- view of this literature), there has been a much nar- rower set of studies within the regional economics literature. …

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