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During the last 20 years, the mining sector in Peru has been experiencing sustained growth. Using census, administrative, nationally and regionally representative data we compare districts in the Peruvian Highlands with a recent mining development with suitable counterfactuals. We find that the new mining activities attract migration inflows, and have some positive effects over educational indicators, and that these impacts, on average, are smaller in districts with lower levels of corporate social expenditure. However, the results of this study suggest that the local potential welfare impact of the mining boom is largely untapped and corporate social responsibility has had a limited role in improving this effect.

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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.