Natural resource abundance, natural resource-oriented industry dependence, and economic growth: Evidence from the provincial level in China

Abstract

The “natural resource curse” thesis states that having an abundant natural resource is not a favorable condition but is rather a limitation on economic growth. This study, which distinguishes the difference between natural resource abundance and natural resource-oriented industry dependence, proposes relevant hypotheses and conducts empirical tests using panel data at the provincial level in China. The research findings are as follows: first, an abundant natural resource is a favorable basis for economic growth. Second, the “natural resource curse” refers to a situation in which a region’s economic development is overly dependent on its natural resource-oriented industries, which leads to negative effects on both medium and long-term economic growth. Third, natural resource-oriented industry dependence indirectly inhibits economic growth through three transmission mechanisms: the crowding-out effect by inhibiting human capital, technology innovation and foreign investment; the Dutch disease effect, which cripples the development of manufacturing; and the institution weakening effect, reflected by the increase in government intervention. This study has further enriched our understanding of the “natural resource curse” thesis.