Abstract
Mining areas often experience a climate of social tension due to the potential trade-off between expected employment impact and concerns for environmental damage. We address this topic from a theoretical perspective that, unlike most empirical research, includes medium-term dynamics. We developed a two-sector dynamic model that provides a new way to identify differences among mining regions in terms of conflict risk, local development, and welfare. There are critical points in the natural-resource base of local nonmining activities and in the pollution rate of mining operations, which determine the type of dynamics and its welfare outcomes due to the opening up of the economy to mining investment. Pollution control is a sine qua non for welfare gains despite new job opportunities in the mining sector.