Gold exploitation and socioeconomic outcomes: The case of Burkina Faso

In the early 2000s, Burkina Faso launched several legal reforms aimed at increasing gold production. This resulted in a gold mining boom, making gold the main export product and the main source of economic growth of the country. We hypothesize that gold extraction improved population living standards. This paper investigates how the gold boom in Burkina Faso which began in 2007 has affected socioeconomic outcomes. We use a simple theoretical model to motivate the testing of several hypotheses regarding these impacts. Employing a difference-in-differences strategy as well as panel data models, we estimate the impacts using data from household surveys undertaken in 2003 and 2009 and administrative data. Consistent with our model, the results suggest that areas hosting gold extraction have better average living standards in terms of headcount ratios, poverty gaps and household expenditures than do areas without gold. However, the gold boom is also shown to have potentially increased local inequality and child labor in areas with these income gains. These results demonstrate the importance of proactive government policy in mitigating negative welfare impacts.