Empirical evidence and economic theory suggest that multinational firms are more productive than their local counterparts. In the global mining industry, however, firms frequently operate in contexts characterized by weak institutions, corruption, and conflict. We test whether these factors attenuate the multinational advantage using a database of corporate ownership changes for 35,567 commercial mines between 2000-2022. Consistent with the literature, event-study estimates reveal that output declines by 8% after mines are taken over by local firms. Localized assets also exhibit higher air pollution, suggesting lower operational quality. However, this local disadvantage reverses in poorly governed settings, such that in the weakest states, local firms have a production advantage of 8%. Local firms also generate greater economic benefits for local communities, particularly in weak states. Economic activity, urbanization, and non-agricultural employment increase around mines following local takeover, highlighting stronger linkages of local firms and suggesting that divestment can trigger structural transformation.
STEG Working Paper Series
• Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy,
Research Theme 5: The Role of the Public Sector,
Cross-Cutting Issue 2: Climate Change and the Environment
Comparative Local and Multinational Advantages in the Global Mining Industry
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