Small-scale Mining and Agricultural Development : Evidence from Northwestern Tanzania

The relationship between rural industries and agriculture during the early stages of economic development is not well understood, despite its potentially central role in economic transformations. I investigate the expansion of small-scale gold mining and processing in north-western Tanzania between 2008 and 2012, and find that small-scale mining causes nearby households to allocate fewer resources to agricultural production and reduce their agricultural output. My findings thus contradict the hypothesis that rural non-farm sector activities generate positive spillover effects for smallholder agriculture in Sub-Saharan Africa by mobilizing agricultural investments. Instead, Tanzanian households appear to substitute away from agricultural activities when outside options improve. The results of this paper confirm that small-scale gold mining increases the consumption levels of nearby households, while having no overall negative effects on school attendance or health outcomes of children. Therefore, while the emergence of small-scale mining does not appear to initiate leaps in agricultural development, it can play an important role in alleviating rural poverty in the short- to medium run