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Production, employment and large-scale mining in southern Ecuador: an incomplete productive linkage?

Abstract:

The objective of this study is to analyze the economic relationships between mining activities, non-mining gross value added, and non-mining employment at the subnational level—an area where the impacts of mining remain underexplored in the existing literature. Using panel data from official sources, the analysis covers 38 cantons in the southern provinces of Ecuador—specifically El Oro, Loja, and Zamora Chinchipe—during the period 2012–2020. Econometric techniques were applied to assess the robustness of the results. The findings indicate that in Zamora Chinchipe, a province where two large-scale mining projects were developed, there is no significant relationship between mining activity and either non-mining gross value added or non-mining employment, suggesting a productive disconnect. However, a positive and statistically significant relationship is found between mining and employment in the tertiary sector, revealing that mining activity is primarily linked to job creation in services, while productive connections with other sectors remain weak or absent. These results support the regional leakage hypothesis, which posits that the benefits of mining are not necessarily retained locally. The findings carry important policy implications, reinforcing the long-standing recommendation to promote stronger productive linkages between large-scale mining operations and other sectors of the economy. In the absence of such efforts, synergies between mining and the broader economic landscape are likely to remain limited or negligible.