This paper examines the effect of polluting industries on agricultural productivity. The
focus is on large-scale gold mining in Ghana that, similar to other fuel intensive activities,
releases environmental pollutants with the potential to have cumulative negative effects
on crops’ health and key agricultural inputs. Guided by a consumer-producer household
framework, we estimate an agricultural production that incorporates the effects of pollution.
We find that, between 1997 and 2005, farmers near mines experienced a reduction on total
factor productivity of almost 40%. We also document higher concentrations of air pollutants
near mines and an increase in rural poverty. The effects are not driven by mines’ competition
for agricultural inputs, selective migration, or changes in perceived risk of expropriation. Our
results highlight an important externality —i.e., losses in agricultural productivity—through
which polluting industries can affect living conditions in rural areas.