Reassessing the linkage between natural resources and economic growth in China: Delving into the impacts of national resource taxes, renewable energy, financial advancements, and provincial fiscal expenditures

Abstract

While there has been extensive research on the relationship between natural resources and the economy, the indirect impacts of natural resources on economic growth remain underexplored. This study, spanning from 1995 to 2017, delves into the link between natural resources and economic growth across China's provincial economies. The research incorporates controllable variables such as financial development, renewable energy, technological innovation, and provincial fiscal expenditures. A variety of panel methodologies were employed, with the innovative MMQR serving as the primary technique. Additionally, the CIPS and Westerlund tests were utilized for unit root and cointegration assessments. To ensure the robustness of the findings, the study also incorporated Granger causality, Bootstrap quantile regression, and causal observations. The results demonstrate that long-term cointegration has been found and that the data are stable at Difference D(1). National resource taxes have a favorable effect on economic growth across all quantiles, according to the MMQR findings. Renewable energy and financial growth also boost all quantiles of the province's economy. Furthermore, the economic expansion brought on by renewable energy occurs in the lower quantiles while it declines in the upper quantiles, indicating that the investment or transition will slow down over the next few years. Furthermore, outcomes from robustness check analysis are similar, trustworthy, and true. The causal connection shows that whereas national resource tax, technological innovation, renewable energy, and financial development have a bidirectional causal relationship between components, public fiscal expenditures have a unidirectional causal relationship with economic growth. Since the study is linked to the provincial government rather than the federal government, the policies are mostly concentrated at the provincial level.