The economics of clearing landmines

Some years ago, I was involved in a project measuring the value of a statistical life (VSL) in Thailand (ungated earlier version here) and Cambodia (ungated version here). Part of the point of that work was to overcome earlier cost-benefit analyses of landmine clearing activities, which had wildly underestimated the benefits of clearing landmines, and often suggested that the costs outweighed the benefits.

The problem with the earlier studies is that they used the human capital approach to valuing the benefits of lives saved from clearing landmines. The human capital approach estimates VSL based on the total value of output that an average person would produce over their lifetime - essentially, it is estimated based on the total wages they would earn. However, time in work is only part of what we contribute to society, and the human capital approach therefore must underestimate the real VSL. An alternative is to use a non-market valuation approach like contingent valuation. Essentially, this involves asking people what they would be willing to pay for a small reduction in the risk of dying. Then, the average that people are willing to pay can be scaled up to work out what they would be willing to pay (on average) for a 100 percent reduction in the risk of death, which is the estimated VSL.

Our work in Thailand and Cambodia showed that the estimated benefits of landmine clearance were much larger than previously estimated. However, in spite of the higher benefits, the cost-benefit calculus only favoured landmine clearance in some areas. There were many places (typically remote, far from roads, where few people lived) where the costs of clearing landmines still outweighed the benefits.

However, benefits from lives saved (and injuries averted) are not the only benefits from clearing landmines. In a recent NBER working paper, Giorgio Chiovelli (London Business School), Stelios Michalopolous (Brown University), and Elias Papaioannou (London Business School) look at the effects of clearing landmines in Mozambique. Specifically, they estimate the impact on economic activity. Mozambique is interesting to investigate, because it is the first country ever to move from being classified as "heavily contaminated by landmines" (in 1992) to "landmine free" (which it was certified as in September 2015).

However, good data on economic activity are scarce in Mozambique due to the years of conflict. So, Chiovelli et al. make use of night-time lights data from satellite images. This is a fairly new and exciting data source, which relies on the observation that areas that are more illuminated have higher economic activity (this has been shown in many studies, but for a graphic example, look at photos that compare neighbouring North Korea and South Korea, such as this one).

Chiovelli et al. exhaustively compiled data on the landmine clearance activities in Mozambique over the period from 1992 to 2015, so that they could evaluate the impacts of clearances in different parts of the country occurring at different times. They then examined the economy-wide impacts, recognising that the main impact of landmines was on reducing market access through making roads and rail impassable. They found that:

...a one-standard deviation increase in the number of cleared CHA [Confirmed Hazardous Areas] increases log luminosity by 0.072 standard deviations... Clearing a locality from all contaminated hazardous areas increases the likelihood of the locality being lit by roughly 4%; this estimate should be compared with an average value of the locality being lit of 9.7% in 1992.

The effect is reasonably large, as:

...cleared localities (as opposed to not-contaminated ones) enjoy a boost in economic activity comparable to that of being one of the few localities endowed with a colonial railroad...

They then test for heterogeneous impacts of landmine clearance, and find that:

...reducing the number of contaminated areas along roads-railroads and clearing areas around villages and towns, especially the ones with cantinas is associated with significant increases in luminosity. On the other hand, removal of landmines in remote, rural areas (the residual category) does not seem to lead to increases in luminosity.

This is interesting, because it complements the findings from my earlier studies. The areas that are remote, with few people, not only would have lower benefits of landmine clearance due to fewer lives saved (and injuries averted), but also have lower benefits in terms of increases in economic activity.

Chiovelli et al. then move on to look at spill-over effects, and find that there are increases in economic activity even for areas with no landmines. This arises because those areas also benefit from landmine clearance, when roads and rail are cleared and areas become more accessible.

Overall, the takeaway message is that there are significant economic benefits from clearing landmines. However, that still doesn't necessarily mean that the benefits outweigh the costs in all areas.

[HT: Marginal Revolution, last June]