ACDE Seminar

This paper investigates how the opening of a new gold mine in Tanzania affects nearby agricultural production and labor allocation in the short run. Using a two-period panel of farm households from the LSMS-ISA and a 2x2 difference-in-differences design, I isolate the local effects of one mine that began operations in 2012. I document that farms located within 15 km of the mine significantly reduced their use of household labor—by about 16% relative to the baseline—without a corresponding rise in hired labor. This reduction in total labor input is associated with a sizable increase in labor productivity, suggesting that workers with lower marginal productivity may have exited agriculture for mining jobs. At the same time, treated farms reduced planted area and total output, but without declines in yield or total factor productivity. To disentangle labor market and environmental effects, I estimate changes in soil quality and show that short-run exposure to mining does not worsen—and may even slightly improve—soil nutrient conditions. These findings provide no evidence of pollution effects in the first year after mine opening. Instead, the dominant short-run mechanism appears to be input competition, particularly over local labor. This paper contributes to the literature by providing micro-level evidence on the immediate agricultural effects of mining, in contrast to previous studies that rely on satellite imagery and long-run pollution proxies. The results underscore the need for policy responses that account not only for environmental risks, but also for labor market disruptions caused by extractive industries in rural settings.