Social Policy and State Revenues in Mineral-Rich Contexts

The expansion of extractive industries in developing countries, dominated by largeinvestments, has produced divided opinion and reaction among scholars, policy makers and civil society with regard to its impact on host countries’ economic performance, governance and peace. Facing that division, the expectation is that the inflow of resources produced by the industry might create opportunities for mineral-rich developing countries to use social policy, both to mitigate the potential negative effects of mineral production, as well as to enhance theircitizens’ social welfare. This paper looks at the political economy features of mineral expansion and reviews the “resource curse” literature through a social welfare lens. The authors address the linkages between mineral expansion and social policy, examining three aspects that underpin the basis for the above expectation: first, the extent to which state revenue and mineral export dependence are connected; second, the likely effects of mineral wealth on socialexpenditure levels and composition, and on the promotion of new social policy initiatives; and, finally, the role that the quality of government plays in determining mineral revenue capture and expenditure.