Resource price fluctuations, resource dependence and sustainable growth

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.