Assessing the Contribution of Natural Gas Exploitation to the Local Economic Growth in China

Abstract

This study investigates whether natural gas exploitation is a blessing or a curse for provincial and prefecture economic growth. This study employs regression models and synthetic control methods (SCM) to investigate the research question based on hybrid panel and time-series data from 1993 to 2015 from 14 prefecture cities in Sichuan province in China. Based on the provincial data of Sichuan, the regression results show that natural gas exploitation is a curse for the provincial economic development of Sichuan because of the negative associations between gas resources and economic performance, for which the increasing rent-seeking in the province may partially account. However, the SCM results find that the local economy of Dazhou city may benefit from its sufficient natural gas resources in the short run, but it is not sustainable. Meanwhile, the gas resource has no significant contributions to the regional economic growth of Sichuan overall, which is partially attributed to the fact that resource exploitation has no significant spillover effects on some sustainable contributors, such as education, innovation, and others. The practical implication for the economic governors is that the resource-consumed economic route is not sustainable, although it may drive local economic growth in the short run.