Mining matters Natural resource extraction and local business constraints

a producer of tradeables. 32 In contrast, there are sizeable positive impacts of mining on both
assets and sales of firms producing non-tradeables and firms in the natural resource sector.
Table 5 provides a summary of all marginal effects.
[Insert Tables 4 and 5 here]
Table A10 in the Appendix shows a number of alternative IV specifications. Throughout the
table we replace country-year-sector fixed effects with sector fixed effects. This yields more
precisely estimated second-stage results. We think, however, that it is important to use countryyear-sector
fixed effects in our baseline specification in Table 4 to adequately control for
country-specific unobserved effects, such as institutions and macroeconomic fluctuations.
While this somewhat reduces the statistical significance of the main estimates (in line with CS)
we nevertheless continue to find relatively precisely estimated negative real impacts.
In columns 5 and 6 we use firm-size dummies. A comparison with the preceding two
columns shows that adding these potentially “bad controls” reduces the coefficients. This
suggests that controlling for firm size may introduce some positive selection bias and lead to
an underestimation of the effect of business constraints on real firm outcomes.
5.4. Robustness: Panel data
While our main firm data set consists of repeated but independently sampled rounds of crosssectional
survey data, a subset of firms was interviewed at least twice (in separate survey
rounds) in Chile, Kazakhstan, Mexico, Russia and Ukraine. We can use this small panel to
observe the same firms at different points in time and compare how firms that experienced an
increase in local mining activity differ from firms that did not. Importantly, this difference-indifferences
framework allows us to include firm fixed effects to control more tightly for time
invariant firm and locality characteristics.
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These negative real impacts also indicate that an increase in self-reported business constraints does not simply
reflect a booming local economy in which firms struggle to meet demand. If this drove our results in Tables 1 and
2, then we should find that lower reported business constraints lead to positive instead of negative real effects. In
other words, instrumenting firm-level constraints reduces concerns about endogeneity of firms’ demand for inputs
in the sense that more productive firms need more inputs and thus feel more constrained.
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