Mine over matter? Health, wealth, and forests in a mining area of Orissa Erin Sills, Subhrendu K. Pattanayak, Shubhayu Saha, Jui-Chen Yang, Pravash Sahu and Ashok Singha 1 Abstract Can mining serve as a pathway for economic development despite the environmental externalities? The co-occurrence of poor economic performance and natural resource abundance is an empirical regularity. The extensive literature on this ‘resource curse’ phenomenon at the national level generally finds that economic dependence on point resources such as minerals is associated with lower levels of economic growth and human welfare. Various explanations have been offered for this association, many related to trade, rent-seeking, and national political institutions. Our premise is that further insight can be obtained through consideration of the resource curse at the micro level, because of heterogeneity in institutions, natural resources and economic behaviors. We empirically test the resource curse at the household and village level in Orissa, India, using data from household surveys and secondary community statistics. Specifically, we examine the possibility that iron ore mining undermines welfare, as represented most fundamentally by health status, conditional on wage earnings. Clearly, mining workers could face occupational health issues from employment in the mine, but direct impacts on individuals are at least potentially compensated through wage differentials. Of greater concern are environmental health effects that occur through degradation of water quality, air quality, or forest resources that are central to the livelihoods of tribal populations in the mining belt. Identification of this environmental health effect requires controlling for the endogenous occupational health effect. The data are from a stratified random sample of 600 households in twenty villages in the mining district of Keonjhar in Orissa. Detailed information on demography, labor allocation and employment, dependence on forest products, health, perceptions of change in local environment were elicited through the interviews. Using GIS, the household data were integrated with secondary spatial data on land cover, hydrology, and location of mines. This allowed us to construct multiple measures of exposure to iron ore mines and access to forest resources. Bivariate analysis at the village level and econometric models at the household level demonstrate the multi-faceted nature of the relationships between mine exposure, forest resources and human welfare. While households closer to mines report higher income from wage employment and better access to infrastructure, they experience higher incidences of many illnesses, rank lower on indicators of human development and own less land and assets for agricultural production. They also derive fewer benefits from the forest, possibly an outcome of the degradation and reduced access to forest reported in villages closer to mines. Multivariate models suggest that the negative impact of mines on environmental health is robust to controls for occupational health and other socio-economic and environmental determinants. This analysis remains timely because of on-going violent conflicts and concern over negative impacts on the welfare of rural populations in the mining areas of India, which is consistent with the notion of a resource curse. Thus, in addition to testing the resource curse at the micro scale, our analysis can inform the policy discourse over the expansion of the mining sector in Orissa. 1 Address correspondence to Subhrendu K. Pattanayak, Fellow and Senior Economist, Public Health and Environment division of RTI International and Associate Professor, North Carolina State University (subhrendu@rti.org ). Sills and Saha are with North Carolina State University; Yang is at RTI International; and Sahu and Singh are with Verve Consulting. For comments on an earlier draft of this paper, the authors are grateful to Richard Damania, Kseniya Lvovsky, Elena Glinskaya, and seminar participants at Indian Statistical Institute (Delhi), Institute of Economic Growth (Delhi) and Government of Orissa Workshop on Mining and Growth.