A Curse After All? Natural Resource Booms, Busts, and Depletion

Wei You

Peking University

Do abundant natural resources promote or hinder local economic development? We contribute to this long-standing debate using a novel data set from China during 1990-2020.  Using a "shift-share" strategy that interacts mineral reserve value with world price changes, we show that resource booms do not crowd out local manufacturing activity but amplify the impacts of resource price fluctuations on local GDP per capita and population for resource-abundant counties. In the long term, a higher resource reserve value is associate with neither faster nor slower economic growth. However, counties that have depleted their major mineral resources experience much slower economic growth conditional on initial resource endowment. Among resources-depleted counties, those who have previously substantially subsidized their manufacturing sector exhibit relatively better economic performance.

Wei You is an Assistant Professor at the Institute of New Structural Economics, Peking University. He obtained his Ph.D. in Economics from the University of California, San Diego in 2017 and was a Research Fellow at New York University in 2017 – 2020. His research interests include urban economics, development economics, and other applied-micro topics. His research has been published in American Economic Journal: Applied Economics, Journal of Labor Economics, Journal of International Economics, Journal of Development Economics, etc.