Concession Stands: How Foreign Investment Incites Protest in Africa

Why do foreign investments that can improve economic welfare also induce protest? Using a newly compiled dataset on commercial mining, commodity prices, and protest in Africa, I rst establish that foreign investment projects increase the probability of protest. I then develop a theoretical model to explain these conžicts. I argue that communities have to strike a bargain with companies but have limited information about the value of the project they are hosting. When communities’ expectations exceed what companies are willing to pay, protests result. I marshal two pieces of empirical evidence consistent with this model: rst, protests are more likely when mineral prices are elevated and, thus, communities hold inžated expectations; and second, this relationship between mineral prices and protests is mitigated by policies that increase transparency and, thus, help correct the informational asymmetry that generates conžict. I do not nd empirical support for alternative explanations for protest related to environmental risks, in-migration, inequality within mining communities, or reporting bias. Despite claims that resource extraction fuels armed conžict, I also do not nd that these commercial mining projects increase the likelihood of rebel activity at or near mine sites. I am very grateful to Avidit Acharya, Gabriel Carroll, Katherine Casey, Gary Cox, Mathilde Emeriau, James Fearon, Teevrat Garg, Francisco Garas, Grant Gordon, Guy Grossman, Robert Gulotty, Stephen Haber, Andrew Hall, Jens Hainmueller, David Hausman, Dorothy Kronick, David Laitin, Duncan Lawrence, Agustina Paglayan, Ramya Parthasarathy, Jonathan Rodden, Kenneth Scheve, Jeremy Weinstein, and Martin Williams for their comments on earlier draŸs. I also beneted from feedback received at APSA 2015 and from audiences at the Harris School, UCLA’s Luskin School, and the University of Rochester. Ph.D. Candidate in Political Science, Stanford University: [email protected]. I acknowledge the support of the Stanford Graduate Fellowship.