The development of modern sectors has long been linked to the displacement of traditional agriculture. The economic literature has focused on explanations associated with reallocation of inputs but has neglected other possible mechanisms, such as the negative externalities of environmental pollution on production. To explore this issue, we examine the case of modern gold mining in Ghana and estimate an agricultural production function to tell apart these mechanisms. Consistent with a spillover effect driven by pollution, we find that the expansion of mining production has reduced agricultural productivity by almost 40%, but is not associated with changes in the use or price of agricultural inputs. We provide evidence of greater air pollution and increased rural poverty near mining areas.
Aragon, F.M.; Rud, J.P. Modern Industries, Pollution and Agricultural Productivity:Evidence from Ghana (IGC Working Paper). International Growth Centre (IGC), London, UK (2013) 52 pp.