Abstract
The previous literature on the resource curse has not taken resource price fluctuations into account. Using panel data covering the period from 1993 to 2017 from 28 provinces in China and dynamic generalized method of moments (GMM), this article takes a fresh look at the relationship between resource dependence and sustainable economic growth and the potential transmission mechanisms taking resource price fluctuations into consideration. We find that resource price fluctuations represent an important factor when researching the resource curse, and there is a U-shaped relationship between resource dependence and sustainable economic growth. However, over the past 20 years, provinces in China remained on the left of the U-shaped curve, and there is a single negative correlation between resource dependence and sustainable economic growth. This means that resource curse occurs in nearly all provinces in China. The analysis of transmission mechanisms of indirect effects taking resource price fluctuations into consideration shows that human capital investment and physical capital investment are more important than other mechanisms, and there are considerably more indirect effects than direct effects when taking into account the total effects of the resource curse.
Highlights
The resource curse hypothesis posits that a negative correlation exists between the resource dependence and sustainable growth in an economy
Multiplying figures in the two columns, we get the indirect effects of resource dependence through the four transmission mechanisms, and the results show that resource dependence has negative indirect effects through the four transmission mechanisms: physical capital investment, human capital investment, the degree of opening up, and innovation input
Traditional studies on the resource curse did not take the effects of resource price fluctuations into consideration and neglected endogeneity related to resource dependence
Summary
The resource curse hypothesis posits that a negative correlation exists between the resource dependence and sustainable growth in an economy. Scholars have not taken resource price fluctuations into consideration [1,2,3,4,5,6], with the exception of Douglas and Walker [7]. In resource-rich areas, the resource industry makes up a large portion of the national economy, and resource price fluctuations exert a greater influence on local economic growth. In a global economic boom, resource demand increases rapidly, leading to a gradual growth in resource prices and resource industry investments, which promotes rapid economic growth in resource-rich areas. In a global economic recession, resource demand shrinks, leading to a fall in resource prices and resource industry investments, which leads to a decline in economic growth. Consider the coal industry (China’s most important energy resource)
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