Mining Revenues and Inclusive Development in Guinea

Mining Revenues and Inclusive Development in Guinea
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Volume/Issue: Volume 2023 Issue 090
Publication date: April 2023
ISBN: 9798400240621
$20.00
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Topics covered in this book

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Economics- Macroeconomics , Economics / General , Infrastructure , growth , output , inequality , calibration , heterogeneous agents , incomplete markets , , infrastructure investment , IMF working paper 23/90 , long-run equilibrium impact , Laffer curve , opportunity cost , Consumption , Mining sector , Global

Summary

What are the potential benefits of increasing the taxation of a foreign extractive sector? This paper applies this question to the case of Guinea by using a multi-sector macro-inequality model with heterogeneous agents. We quantify the long-run equilibrium impact of additional taxation when the proceeds are invested in human capital, inclusive infrastructure, and social transfers. Our analysis focuses on the response of GDP, labor formalization, poverty rates, Gini coefficients, rural/urban inequality and sectoral reallocation. The three forms of investment are complementary. Infrastructure investments favor formal production in the urban area while growth and government transfers boost the demand for food. These effects help support the rate of return to education, protecting job formalization through higher wages and prices of informal goods, as the education policy boosts labor supply in rural and urban areas.