Does Financial Development Hamper or Improve the Resource Curse? Analysis Based on the Panel Threshold Effect Model

Abstract

This paper analyzes the “resource curse” and “financial threshold effect” that may exist in China and then uses the data from 30 provinces from 2004 to 2018 as research samples. We used linear regression and nondynamic panel threshold models to analyze the financial threshold effects of the “resource curse” hypothesis and the “resource curse” phenomenon. At the same time, we divided the level of financial development to verify the robustness of the research conclusions in this paper. The study found the following: (1) There is a certain correlation between the abundance of resources and economic growth. Whether this can be seen as a “curse” or a “blessing” of resources is significantly related to the degree of financial development. (2) Whether financial development can alleviate the “resource curse” depends on the degree of financial development. In the extremely scarce stage of financial resources, the resource endowment effect is obvious, and the level of economic development in resource-based regions will be higher than in other regions; when the level of financial development is low (financial resources are not scarce and have not reached a reasonable level), the phenomenon of the “resource curse” appears; when the level of financial development is highly developed, economic development benefits more from financial development, and the effects of resource endowment decline. Only when financial development is at a reasonable level can resource endowments effectively raise the level of economic development.

Transport-Environmental Kuznets Curve Hypothesis: Evidence From Belt and Road

“…Finally, though some Belt and Road countries have unique resource advantages and strong economic complementarities, most of the cooperation regarding resource management and trade has promoted economic growth at the expense of increases in transport carbon emissions. This is the reason why most resource-rich Belt and Road countries are experiencing the “resource curse” (Z. Sun & Cai, 2020).…”

“…This is the reason why most resource-rich Belt and Road countries are experiencing the ''resource curse'' (Z. Sun & Cai, 2020). For example, due to the ''oil curse,'' Russia has been trapped in an economic development dilemma for decades (J.…”

The effect of resource abundance on Chinese urban green economic growth: A regional heterogeneity perspective

“…Xie and Zhai (2020) use panel data from 30 provinces and cities in China from 2005 to 2018, verifying that financial development can improve investment efficiency, and alleviate the negative effect of "crowding-out" effect. Similarly, by using provincial panel data, Sun and Cai (2020) and Khan et al (2020) maintain that the negative effect of "resource curse" in China is mainly through "crowding-out" effect.…”

“…“Resource curse” phenomenon, one of the important propositions of development economics, refers to a phenomenon that the excessive dependence on natural resources will have a harmful impact on economic growth. Furthermore, many researchers have proved that there is “resource curse” phenomenon in China, causing negative effect on China's economy (e.g., Khan et al., 2020; Shao & Yang, 2011; Sun & Cai, 2020).…”

“…Furthermore, the decline of manufacturing industry will have negative impact on labor productivity and economic vitality (Li & Tan, 2020;Shao & Yang, 2011). Most importantly, the regions with abundant natural resource have insufficient incentives to develop other clean industries and resource use efficiency, which is not beneficial to sustainable economic development (Kim & Lin, 2017;Sun & Cai, 2020).…”