Mineral extraction and long‐term human capital accumulation

• Published date: 01 February 2024
• Author: Chen Feng,Yao Zhang,Renjie Zhao,Xiaolu Zhao
• Date: 01 February 2024
• DOI: http://doi.org/10.1111/rode.13050

REGULAR ARTICLE

Mineral extraction and long-term human

capital accumulation

Chen Feng

1

|Yao Zhang

2,3

|Renjie Zhao

4

|Xiaolu Zhao

5

1

School of Economics and Finance, Xi'an

Jiaotong University, Xi'an, China

2

School of Accounting, Nanjing

University of Finance and Economics,

Nanjing, Jiangsu, China

3

Nanjing University of Aeronautics and

Astronautics, Nanjing, Jiangsu, China

4

School of Economics and Management,

Northwest University, Xi'an, China

5

School of Economics, Ocean University

of China, Qingdao, China

Correspondence

Yao Zhang, School of Accounting,

Nanjing University of Finance and

Economics, No. 3 Wenyuan Road,

Nanjing, 210046 Jiangsu, China.

Email: andyszy@163.com

Funding information

National Social Science Foundation of

China, Grant/Award Number: 20CGL005

Abstract

This study examines the long-term impacts of early

coal mining on human capital outcomes. Based on

coal mines across 260 prefectures in late Qing China

(c.1840–1912), we find that early coal mining led to a

significant rise in schooling years in 2000. We trace

the historical channels and show that the influence of

early coal mining has persisted through and helped

shape the modernization of China, which includes

local industrialization and a complimentary supply of

educational infrastructure. These results suggest that

in contrast to other grabbing mineral extraction,

inclusive coal mining systems benefit long-term

human capital accumulation and economic growth,

not mining activity per se.

KEYWORDS

coal mine, human capital accumulation, mineral extraction

JEL CLASSIFICATION

N35, N55, N95

1|INTRODUCTION

Early mineral extraction requires primitive labor participation and facilitates long-term

economic growth. Historically speaking, coal has been placed at the center of industrialization

(Allen, 2009). For example, in a comparative study of the Industrial Revolution, Cipolla (1972)

revealed that Britain had convenient access to abundant coal mine resources, and this access

helped reshape the world's economic landscape. Given that minerals and other natural

resources are essential to economic growth, a strand of literature holds a geographical deter-

minism view, arguing that natural resources and geographical and ecological conditions are

Received: 30 June 2021Revised: 6 July 2023Accepted: 20 August 2023

DOI: 10.1111/rode.13050

190 © 2023 John Wiley & Sons Ltd.Rev Dev Econ. 2024;28:190–215.wileyonlinelibrary.com/journal/rode

core explanatory factors for the within- and between-region differences of long-term economic

performances (Bloom et al., 1998; Diamond, 1997; Kamarck, 1976; Sachs, 2003; Sachs &

Warner, 1997,1999).

However, questions still exist when explaining socioeconomic outcomes in areas with abun-

dant natural resources. Among 43 representative papers studying natural resource endowments

and long-term economic performance, about 40% found that abundant natural resources pre-

sent negative effects, 40% failed to obtain a definite conclusion, and only 20% found positive

effects (Havranek et al., 2016). Accordingly, geographical determinism has been challenged by

recent findings suggesting a “resource curse.”To this end, papers such as Hall and Jones (1999)

began to explain the differences in economic performance between countries from an institu-

tional perspective.

1

This strand of literature emphasizes that natural resource endowments play

an indirect rather than decisive role in long-term economic growth and that institutional

arrangements are the actual determinants (Acemoglu et al., 2001,2002,2005; Rodrik

et al., 2004).

2

Indeed, controversy over whether geographical factors or institutional factors play

a more important role in economic growth has become a debating issue in the research fields of

development economics and economic history (Guo & Xu, 2005).

Unlike geographical determinism, which emphasizes the direct impact of natural resource

extraction, institutional determinism pays more attention to human capital accumulation in

long-term economic growth (Baten & Hippe, 2018; Dias & McDermott, 2006; Glaeser

et al., 2004; van Leeuwen & Foldvari, 2008). For example, studies have shown human capital

accumulation contributed to the great divergence between the East and the West in the 19th

century (Baten et al., 2010; Baten & van Zanden, 2008; Li & van Zanden, 2012). However, the

relationship between natural resource exploitation and human capital accumulation is unclear.

Studies have failed to reach an agreement on this issue, which has generated much debate.

Some papers have argued that mineral extraction reduces human capital accumulation by

increasing the opportunity cost of education (Black et al., 2005), which further inhibits entre-

preneurship and entrepreneurial behavior (Glaeser et al., 2015). This strand of literature has

concluded that the crowding-out effects on human capital due to mineral extraction restrict

long-term economic growth (Dell, 2010; Esposito & Abramson, 2021). However, mineral extrac-

tion can also increase the fiscal revenue of local governments, thereby improving local infra-

structure construction and reducing poverty in those mining areas (Loayza & Rigolini, 2016).

Studies have also shown that mining can have significant positive effects on human capital

accumulation (Stijns, 2006), as it increases the income of residents in mining areas by expan-

ding local market demand (Arag

on & Rud, 2013). Therefore, identifying the effects of natural

resource extraction on long-term human capital accumulation is key to clarifying the dispute

between geographical determinism and institutional determinism.

To address this, we use the unique coal mining data of 260 prefectures in the late Qing

dynasty of China (c.1840–1912) and the Fifth National Population Census data in 2000 to

study the long-term effects of early coal mining on contemporary human capital outcomes.

Wefindthatearlycoalminingleadstoasignificant rise in school years in the modern era.

This positive causal effect is still valid after retesting with omitted variables, re-estimating

based on instrumental variables, and a series of exclusion tests, and thus, we further

explore the mechanism behind it. The results show that an inclusive coal mining system

benefits the process of human capital accumulation, not mining activity per

se. Specifically, we find that the influence of early coal mining has persisted through the

modernization of China, including local industrialization and the complimentary supply

of educational infrastructure.

FENG ET AL.191