The forgotten resource curse: South Africa's poor experience with mineral extraction

Studies of the resource curse as it affects African states abound, yet few deal specifically with the experiences of South Africa. The inability of countries to convert natural resource wealth into income and improved development measures remains highly pertinent and is especially apparent in Africa's largest economy. This paper takes a unique approach to study the resource curse by comparing South Africa's political economy with the existing resource curse literature. Using data from international organisations, studies of poverty and qualitative evidence this paper examines South Africa's experience with mineral extraction. It is found that South Africa has experienced many of the symptoms outlined in the resource curse literature including relatively slow GDP growth, gross inequalities, entrenched poverty and the creation of a rentier state. Overall, it is concluded that South Africa has failed to benefit from natural resource wealth and can be classified as a resource cursed state. Not only has mineral wealth failed to benefit much of South Africa's population, sections of society have actually been harmed through the process of mineral extraction. This paper is the first to examine South Africa in light of the current resource curse literature and to conclude that the state far more closely resembles its sub-Saharan African neighbours than its upper-middle income peers.     

A heuristic approach to stochastic cutoff grade optimization for open pit mining complexes with multiple processing streams

Cutoff grade specifies the available supply of metallic ore from an open pit mine to the multiple processing streams of an open pit mining complex. An optimal cutoff grade strategy maximizes the net present value (NPV) of an open pit mining operation subject to the mining, processing, and marketing/refining capacity constraints. Even though, the quantities of material flowing from the mine to the market are influenced by the expected variation in the available metal content or inherent uncertainty in the supply of ore, the majority of cutoff grade optimization models not only disregard this aspect and may lead to unrealistic cash flows, but also they are limited in application to an open pit mining operation with single processing facility. The model proposed herein determines the optimal cutoff grade policy based on a stochastic framework that accounts for uncertainty in supply of ore to the multiple ore processing streams. An application on a large-scale open pit mining operation develops a unique cutoff grade policy along with a portfolio of mining, processing, and marketing/refining rates. Owing to the geological uncertainty, the approach addresses risk by showing a difference of 14% between the minimum and maximum production rates, cash flows and NPV.     

A cointegration and causality analysis of copper consumption and economic growth in rich countries

The paper examines the copper consumption-economic growth nexus for 16 rich economies from the period 1966 to 2010. Various generations of panel unit root and cointegration tests are applied. Both series are found to be integrated of order one. Evidence of cointegration is found especially when controlling for breaks and long-run cross-sectional dependence. Causality is investigated using a vector error-correction mechanism (VECM) framework. At individual level, unidirectional causality running from economic growth to copper consumption is unraveled for Finland, France and UK in the long-run. Unidirectional causality is also found running from copper consumption to economic growth for Spain. Long-run bi-directionality between economic growth and copper consumption is found for Belgium, Greece, Italy, Japan and South Korea. The neutrality hypothesis holds for Australia, Austria, Canada, Netherlands, Portugal, Sweden and USA in the long-run. Taken as a whole, panel causality test reveals a long-run unidirectional causality running from economic growth to copper consumption.     

Iron ore spot price volatility and change in forward pricing mechanism

To examine the impact of the change in forward pricing mechanism on the volatility of iron ore spot prices, we model the iron ore daily price of Platts IODEX from October 7, 2008 to September 21, 2012. The identified iron ore spot price tends to be less volatile after the introduction of quarterly pricing mechanism. Our main approaches are as follows: (i) to decompose the spot price of Platts IODEX into two subsamples and relate the result of the structural break to the date of the switch in the iron ore forward pricing mechanism; (ii) to apply the EGARCH (1, 1) model to simultaneously capture the long memory and the asymmetric effect on the volatility of the iron ore spot price; and (iii) to delineate the news impact curve to further interpret the asymmetric effect.     

An empirical approach to determine specific weights of driving factors for the price of commodities—A contribution to the measurement of the economic scarcity of minerals and metals

In recent years, commodity markets show a large amount of volatility and substantial price jumps, indicating an increasing economic scarcity in many cases. As this scarcity makes commodity procurement a critical issue for national economies, industry sectors and manufacturing companies, a number of criticality indices have been presented and utilized in science as well as in practice. These indices are mostly based on an aggregation of different key figures, both qualitative and quantitative. However, the weighting of the different factors is in most cases arbitrary or based on rough estimates.     

When do environmental regulations backfire? Onsite industrial electricity generation,energy efficiency and policy instruments

More than half of all energy produced by electric utilities is lost in the form of waste heat. However, when manufacturing facilities choose to produce their own electricity, this waste heat is captured by Combined Heating and Power (CHP) technologies and used in the production process. As a result, manufacturers' pollution footprint can be dramatically reduced by choosing to produce electricity onsite rather than purchasing it from a utility. This paper uses Census microdata to study manufacturers’ decision to produce electricity onsite and examines how plants adjust onsite generation when they are subject to environmental regulations. Environmental regulations will backfire if they cause manufacturers to produce less electricity onsite and shift to electricity from less efficient, offsite electric utilities. We find that manufacturing plants subject to NOx command-and-control regulations decrease onsite electricity generation, increase electricity purchases from off-site utilities and see declines in their energy efficiency. However, manufacturers subject to cap-and-trade see no decline in onsite generation and experience improvements in energy efficiency. These findings demonstrate the importance of instrument selection and identify a new pathway through which emissions leakage may occur.     

The environmental effects of trade within and across sectors

This paper presents a model that combines within and across sector channels through which trade affects our environment by embedding heterogeneous firms and fixed costs into a two-sector framework with an endogenous response to environmental policy. In contrast to existing literature that tends to examine these channels separately, the combined framework developed here shows how cross-sector comparative advantage and within-sector responses to trade and environmental policy or factor endowments interact to affect our environment through three channels: changes in output, cross-sector market share, and emissions intensity. In contrast to a single-sector model with neutral productivity, consideration of two sectors allows for trade liberalization to affect the allocation of inputs in each sector and thereby affect total pollution output. The additional consideration of heterogeneous firm responses to falling trade costs will generate endogenous increases in productivity that increase output, reduce aggregate emissions intensity, and moderate the cross-sector resource adjustment, relative to a representative-firm model. Simulation results show how the combined framework can replicate existing empirical outcomes, and provide concise ceteris paribus insights regarding the potential role of trade and environmental policy changes and factor expansion in driving observed outcomes and their contribution to each of the three channels.     

Personality and economic choices

There is substantial variation in individual preferences for public goods, yet much of that variation remains poorly understood. However, simple measures of personality can help to explain economic values and choices in a systematic way. In this paper, we examine the effects of personality on individual economic choices over public environmental goods. Based on three datasets from three separate stated preference studies, we use a hybrid choice econometric framework to examine the effects of personality on preferences for the status quo, changes in environmental quality, and costs of investing in environmental improvements. We find effects that are consistent across all datasets. Personality, a stable feature of an individual's character that is simple to measure, enriches explanations of why the demand for environmental goods varies across people, provides an indication of how different people are likely to react to the introduction of environmental policies, and explains substantial differences in Willingness to Pay.     

Urban afforestation and infant health: Evidence from MillionTreesNYC

This paper examines the impact of urban afforestation on infant health outcomes by exploiting a quasi-experimental setting where one million new trees were planted in New York City (NYC), but not in counties surrounding NYC over the same time period. Using a near-universal birth record of NYC and surrounding counties over 2004–2015 and employing both the synthetic control method and a difference-in-differences model, we find that an approximately 20% increase in urban forest cover decreased prematurity and low birth weight among mothers in NYC by 2.1 and 0.24 percentage points, respectively, relative to similar mothers outside of NYC. The low birth weight finding is equivalent to getting a mother smoking two cigarettes a day during pregnancy to quit. An internal validity test suggests that changes in the composition of NYC mothers cannot explain the observed effects. Additionally, we find evidence that declines in PM_2.5 concentrations and increases in outdoor walks are potential causal mechanisms. Results suggest that urban afforestation may be able to complement existing policies aimed at improving infant health.     

Microclimate effects of wind farms on local crop yields

This paper considers a novel spillover effect of wind farms - microclimate impacts on neighboring crop yields. Using US county-level crop and wind capacity data, I examine the effects of wind energy development on crop yields, controlling for time-invariant county characteristics and state-level annual shocks. I find robust evidence that counties with increased wind power development have also experienced increased corn and other crop yields, such that an additional 100 MW of wind capacity increases county yields by roughly 1%. At recent prices, this implies a more than $5 dollar per megawatt-hour local benefit, corresponding to several hundred million dollars in annual benefits.