Can the mining industry improve social welfare? Evidence from Mongolian provinces

Abstract

The mining industry plays a crucial role in the economies of many resource-rich countries, including Mongolia. While mining is widely recognized for driving economic growth, its implications for social welfare remain debated. This study investigates the relationship between the mining sector’s contribution to gross domestic product (GDP) and the Human Development Index (HDI) across Mongolian provinces over the period 2004–2023. Using a balanced panel dataset and a two-way fixed effects regression model, we examine how changes in mining activity influence key dimensions of human development, such as education, health, and living standards. Our findings reveal a positive and statistically significant association between the mining share of GDP and provincial HDI scores. The results suggest that mining-driven economic activity not only generates fiscal revenues and employment but also indirectly fosters improvements in public services and infrastructure, thereby enhancing social welfare. We also observe that the positive effects are more pronounced in urbanized provinces with better institutional capacity, suggesting that local governance plays a mediating role. To further test the robustness of the results, we conduct several sensitivity checks, including alternative model specifications and lagged variables. The study contributes to the literature by providing empirical evidence from a developing, resource-dependent country context and underscores the potential for the mining sector to serve as a driver of inclusive development. The findings offer policy insights for balancing economic extraction with long-term welfare enhancement in mineral-rich regions.