The “Curse of Resources ” Revisited: A Different Story from China

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