Concession Stands: How Mining Investments Incite Protest in Africa
This research contributes to the literature on natural resources and conflict. Christensen shows that the probability of a protest or riot in a locality roughly doubles where a commercial mine starts production. By contrast, he sees no effect on the likelihood of rebel activity or armed conflict.
The paper finds that the usual grievance-based explanations, such as environmental issues, in-migration, displacement, inequality and corruption, do little to predict where and when protests occur. Instead, Christensen adapts an argument that labour economists have long made about why strikes occur: incomplete information. Host communities sometimes overestimate the true value of a mining project -- particularly as commodity prices rise -- and social conflicts result from this disagreement about the size of the pie to be split.
One implication of Christensen's argument is that firms cannot credibly disclose their projects' margins. Local communities recognize that companies have an incentive to understate the true profitability of mines in an effort to moderate local demands. He finds that EITI candidacy helps to moderate the effect of rising prices on protests in mining areas and argues that this is consistent with transparency efforts helping to correct the informational asymmetry between local communities and companies. EITI candidacy reduces the relationship between logged prices and protests by roughly 15% percent. This effect increases (roughly doubling) with full compliance. While EITI does not eliminate social conflict or corruption, it does appear to dampen the effect of rising prices on protests in mining areas. Christensen acknowledges that he cannot rule out other regulatory changes that occur in parallel to EITI admission that may also moderate the relationship between prices and social conflict.