Short Abstract:

In this paper, we rely on the gold price boom cycle from 2002-2012 to examine whether illegal and informal gold mining can improve the livelihoods of the local population. Our analysis is indicative of a strong positive impact on household income and expenditures. However, we do not observe improvements in long-term aspects of living standards, such as housing quality or asset ownership.

Long Abstract:

In recent decades, illegal and informal gold mining has become, at the expense of substantial environmental degradation, an important economic activity in southeast Peru. Not much is known, however, about how the living standards of the local population are affected by this activity. In this paper, we rely on the gold price boom cycle from 2002-2012 to examine whether illegal and informal gold mining can improve the livelihoods of the local population. Using geospatial data on land degradation due to illegal and informal mining in Madre de Dios, we identify households in districts that have experienced substantial land degradation from these sectors and compare them with households in districts that haven’t. Our analysis is indicative of a strong positive impact on household income and expenditures, with increases close to 32 and 50 percent, respectively. However, we observe that these gains have not yielded improvements in long-term aspects of living standards, such as housing quality or asset ownership. Our results are robust to changes in the classification of households affected by illegal and informal mining, alternative specifications, and changes in the baseline and endline settings.