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

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.