Abstract
This paper reports the main results of an assessment of the local and regional economic benefits of a new large-scale iron ore project that is currently being developed by Northland Resources in northern Sweden. Specifically, the mine is located in Pajala—a municipality of approximately 6,300 residents in Norrbotten County in northern Sweden. We employ the Swedish regional impact model rAps to estimate the local and regional benefits of the project, focusing mainly on the employment opportunities created by multiplier effects. The rAps-system links an input–output model of regional production with a demographic model of net migration and commuting. This allows us to use a scenario-based approach and simulate the impact of different demographic assumptions, which are key determinants of the magnitude of local benefits. The local labour supply is limited and if most of the workers are non-residents who commute, much of the household incomes generated by the project flow out of Pajala and benefit other municipalities in the region. Our results indicate that the local employment multiplier for Pajala varies between 1.4 to 1.6 depending on the demographic assumptions, but the effect on local incomes is limited if labour demand is serviced mainly by commuters from other municipalities. The estimated regional employment multiplier for Norrbotten County is approximately 1.7, reflecting that the bigger and more diverse regional economy is better equipped to supply inputs to mineral development projects.
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Notes
This was described in a so-called Preliminary Economic Assessment, conducted for Northland Resources by Wardell Armstrong International (2008).
Formerly referred to as NUTEK.
These include Anderstig and Wigren (2009), the Swedish agency for growth policy analysis—Tillväxtanalys (2010) and Ejdemo and Söderholm (2011). The two former reports find that the local employment multiplier effect associated with the project ranges between 1.3 and 1.5, depending on the demographic outcome, meaning that for every 100 jobs at Kaunisvaara, 30–50 jobs are created indirectly in the local supply chain and by induced consumption spending.
While the construction industry is an important local employer in Pajala, only 166 persons (of all trades) were openly unemployed in 2010, which illustrates the limited supply of local labour.
These commuters service the total demand for labour in Pajala and are thus not limited to jobs supported by the Kaunisvaara Project.
According to Kaarlela (2009), such efforts are already in place, to some extent.
References
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Acknowledgments
I would like to thank Northland Resources for providing me with the opportunity and funding to work on the regional economic impact study of the Kaunisvaara Iron Ore Project. I am grateful towards Max Smith of Gecko Environment, who oversaw the work on behalf of Northland and offered numerous valuable comments on draft versions of the full regional economic impact study. The work has also benefited from comments by Patrik Söderholm, Magnus Ericsson and Hannu Törmä. Any remaining errors, however, are my own.
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This paper was presented at the conference ‘Sustainable production and consumption of mineral resources—integrating the EU’s social agenda and resource efficiency’, 20–22 October 2011, Wroclaw, Poland.
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Ejdemo, T. Mineral development and regional employment effects in northern Sweden: a scenario-based assessment. Miner Econ 25, 55–63 (2013). https://doi.org/10.1007/s13563-012-0023-z
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DOI: https://doi.org/10.1007/s13563-012-0023-z