Is financial development hampering or improving the resource curse? New evidence from China

Xie Rongwei and Zhai Xiaoying

Resources Policy, 2020, vol. 67, issue C

Abstract: This paper uses panel data from 30 provinces and cities in China from 2005 to 2018 to conduct an empirical test of path analysis through SEM models. The results show that the “resource curse” phenomenon has appeared in China. At the same time, the system GMM model is used to verify the ways in which financial development affects the relationship between natural resources and economic growth, and finally explore the path to break through the curse of resources through financial development. The conclusions are as follows: (1) There is a negative correlation between natural resources and economic growth, and the resource curse effect is significant in China. At the same time, the results indicate that the degree of financial development is different, and financial development has indeed eased the negative correlation between resource endowment and economic growth. (2) Natural resources endowment has a significant positive correlation with economic fluctuations, while financial development variables are significantly negative, indicating that a developed financial system can weaken the negative correlation brought by natural resources to economic growth through the fluctuation, to a certain extent to ease the “resource curse”. (3) Financial development can alleviate the negative impact of the “crowding effect” on the beneficial factors in the economy by promoting human capital and technological innovation. (4) Finance can effectively pool social idle funds and effectively invest in other socially beneficial constructions, improve investment efficiency, and alleviate the “resource curse” effect.

Keywords: Financial development; Resource curse; Natural resources; Economic growth (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:67:y:2020:i:c:s0301420720300556

DOI: 10.1016/j.resourpol.2020.101676

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