How does environmental regulation break the resource curse: Theoretical and empirical study on China

Abstract

This paper incorporates environmental regulation, resource development and economic growth into a unified framework, and introduces a four-sector endogenous growth model, including environmental protection sector and resource development sector. Then, the resource curse coefficients of 232 prefecture-level cities in China are estimated based on the data of China's Industrial Enterprise Database from 1998 to 2013. Finally, the breaking effect of environmental regulation on the resource curse and its internal mechanism are empirically examined. The results show that the resource curse effect mainly occurs in the inland cities of the central and western regions and the northeast region; while the phenomenon of resource curse does not exist in most coastal and eastern cities, only a few cities are in the marginal resource curse areas and serious resource curse areas. The relationship between environmental regulation and the resource curse coefficient presents an inverted U-shaped curve, and only when the environmental regulation intensity crosses the turning point can environmental regulation break the resource curse. Environmental regulation can also indirectly break the resource curse phenomenon in full samples by improving green technological innovation level, lowering resource dependence and accelerating manufacturing development. However, the manufacturing development effect of environmental regulation on the resource curse has not yet been found in the resource curse areas.