Natural resource dependence and urban shrinkage: The role of human capital accumulation

Abstract

Urban shrinkage has occurred worldwide, but previous studies on the shrinkage of resource-based cities have not clearly identified the causal relationship between natural resource dependence and urban shrinkage, nor have they recognized that the root cause of urban shrinkage is the development path relying on natural resource rather than resource exhaustion. Using Chinese census data and DMPS satellite lighting data from 2000 to 2010, this paper measures the urban shrinkage at the county level of China from two dimensions of population and economy. On this basis, we investigate the impact and its mechanism of natural resource dependence on urban shrinkage. The results show that natural resource dependence significantly increases the probability of urban shrinkage at China's county level. This finding is confirmed after a series of robustness checks, including using the instrumental variable method, excluding “pseudo correlation”, conducting the placebo test, and replacing the measure of independent variable. Moreover, mature and declining resource-based counties are more likely to suffer from urban shrinkage, while growth and reproducible resource-based counties are less affected by the resource curse. We also find that natural resource dependence significantly damages human capital accumulation by reducing the attractiveness to human capital and hampering school-age residents' receiving higher level education. Hence, crowding out human capital is the key mechanism of urban shrinkage caused by natural resource dependence.