From resource curse to green renaissance: Analyzing the dynamics of natural resource abundance on China's green total factor productivity during business cycles

Abstract

The current body of research fails to thoroughly examine how the abundance of natural resources affects China's green total factor productivity during different phases of economic cycles. The interconnection between the natural resource abundance and the green total factor productivity in China, the second-biggest economy worldwide, offers valuable insights into the sustainable management of resources amidst fast economic expansion. This research aims to analyze how the abundance of natural resources influences China's total green factor productivity during different phases of business cycles. A fully modified and dynamic ordinary least squares methodology uses cyclical data from 1990Q1 to 2019Q4. The findings indicate that during boom periods, a surge in natural resource abundance, gross domestic product, financial development, foreign direct investment and renewable energy consumption are correlated with heightened levels of green total factor productivity, suggesting that resource-dependent industries experience positive effects due to improved availability and quality of resources. Conversely, the findings infer that a decline in these variables is observed during the recession period, leading to a decrease in green total factor productivity. The results indicate a pro-cyclical relationship between natural resource abundance, gross domestic product, financial development, foreign direct investment and renewable energy consumption during periods of expansion and contraction. Based on the research findings, the study suggests that legislators should emphasize measures that foster investments in clean energy, ethical resource management practices, and financial development during economic booms. In contrast, during economic contractions, attempts should be concentrated on sustaining or boosting investments in green technology, encouraging feasible resource utilization, and enacting policies that foster foreign direct investment.