AcademicsWorking Papers

The “Curse of Resources” Revisited: A Different Story from China
Ying Fang, Li Qi, Yang Zhao
#002007 20131014 (published)
Whether natural resources boost or deter economic development remains an open question in the literature. Papyrakis and Gerlagh (2007) found a significant negative association between economic growth and resource abundance at a U.S.-state level. They demonstrated that resource abundance crowds out human capital accumulation and R&D investment. This paper performs an empirical analysis on data from 95 cities in China from 1997 to 2005 and finds no obvious evidence of a significant relationship between natural resources and economic development at the city level. By controlling province dummy variables, however, it becomes clear that resource abundance in one city imposes a significant positive “spill-over” effect on the other cities within the same province. Moreover, an analysis on transmission channels of such spill-over effects reveals that resource abundance boosts the manufacturing industry in the other cities, which is consistent with the “big push” theory.
JEL-Codes: O13, O18
Keywords: Curse of resources; Spill-over effects; Big push

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