Working Paper

The channels for indirect impacts

This paper discusses the channels of impact of an extractives activity on an economy by
presenting a brief description supported by graphics of the different routes through which the
direct economic and social impacts of these activities might be enhanced.

These routes include those that often have the highest political profile, namely spending of government revenues. But the paper also discusses other routes and channels that arguably are far more important, such as
the direct effects of corporate spend in local supply chains; the immediate ‘multiplier’ effects of
these; the further multipliers that follows from significant wage growth in these supply chains as
well as in the main extractive activity; the new downstream activities that may be built on the
primary extractive activity; and the externalities that can accrue from the direct boost to skills
training that a large extractive investment is likely to provide.