Social Conflict in Rural Regions and Firm Ownership: Evidence from the Mining Sector in Latin America

Using firm-level data for five countries in Latin America we find a negative and statistically significant link between social conflict in rural areas and ownership of mines. This result suggests that the social conflict around mining projects can affect strategic firm behavior intended to diversify risk in the face of social, political and financial pressures. It constitutes evidence that the costs of social conflict can be considered a serious challenge for firms and diverges from the literature which has generally viewed these costs as relatively unimportant to investment decisions. We apply broad sensitivity tests and find that this is robust. Our results also hold to a formal test of changes in specification.

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Latin American Economic Review aims to be the leading general interest journal on topics relevant to Latin America. The journal welcomes high-quality theoretical and quantitative papers on economic, social and political-economy issues with a regional focus. Articles presenting new data bases or describing structural reforms within a rigorous theoretical framework will also be considered. A few (illustrative) examples of topics that may be of special interest to this journal include: inflation, informal sector, corruption, crime, drug policy, unions, social exclusion, price controls, energy and environmental policy, natural resources, and technology transfer.