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Mining booms and growth in Laos – empirical result from CGE model

Phouphet Kyophilavong (Faculty of Economics and Business Management, National University of Laos, Vientiane, Lao People’s Democratic Republic)

International Journal of Development Issues

ISSN: 1446-8956

Article publication date: 4 April 2016

Abstract

Purpose

This study aims to lay out a framework to quantify the impacts of mining booms on the macro-economy in Laos.

Design/methodology/approach

A computable general equilibrium (CGE) model is used to investigate the impact of the mining sector on the Laos’ economy by examining this sector’s increase in both stock and the productivity of capital.

Findings

It was found that higher capital stock and productivity lead to increased value added, production, exports and investment in the mining sector. These increases result in higher real gross domestic product, exports and investment. Unfortunately, the effects from the associated Dutch disease negatively impact real production and value added in the agriculture and industry. Suitable macroeconomic management and prudent administration of the windfall income from mining are therefore important.

Practical implications

The finding is important for policymakers to implement policy to deal with the negative impact of mining booms.

Originality/value

It is the first study to attempt to investigate the impact of the mining sector on the Lao economy using the CGE model. Second, we also provide recommendation to cope with the negative impact from mining booms which provide important implications for other developing countries that face the negative impact from mining booms.

Keywords

Acknowledgements

This work is supported by funding from the Partnership and Economic Policy (PEP) Research Network, which is financed by the Australian Agency for International Development (AusAID), the Canadian International Development Agency and the International Development Research Centre (IDRC). The author would like to thank PEP resources persons: Dr Bernard Decaluwé, Dr Hélène Maisonnave and Dr John Murray Cockburn at Laval University. The conclusion and recommendation in this paper are the author’s alone and do not necessarily reflect the views of PEP. The author is also responsible for any errors in this paper.

Citation

Kyophilavong, P. (2016), "Mining booms and growth in Laos – empirical result from CGE model", International Journal of Development Issues, Vol. 15 No. 1, pp. 51-61. https://doi.org/10.1108/IJDI-08-2015-0052

Publisher

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Emerald Group Publishing Limited

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