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Resource abundance and financial development: Evidence from China

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  • Yuxiang, Karl
  • Chen, Zhongchang

Abstract

In this paper, we extend the debate on the resource curse by focusing on a new mechanism. Theoretically, resource abundance may have a negative influence on financial development by impacting trade openness, the demand for financial reforms, social capital accumulation and productive investments. Using provincial panel data of China, the empirical analysis confirms such a negative link between mineral resource abundance and financial development. The resource-rich regions tend to have a slower pace of financial development than resource-poor ones. Since the positive relationship between financial development and long-run growth is also confirmed by the analysis, our findings suggest that financial development constitutes an important mechanism through which resource abundance can impact economic performance.

Suggested Citation

  • Yuxiang, Karl & Chen, Zhongchang, 2011. "Resource abundance and financial development: Evidence from China," Resources Policy, Elsevier, vol. 36(1), pages 72-79, March.
  • Handle: RePEc:eee:jrpoli:v:36:y:2011:i:1:p:72-79
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    Cited by:

    1. Badeeb, Ramez Abubakr & Lean, Hooi Hooi & Smyth, Russell, 2016. "Oil curse and finance–growth nexus in Malaysia: The role of investment," Energy Economics, Elsevier, vol. 57(C), pages 154-165.
    2. Blanco, Luisa & Grier, Robin, 2012. "Natural resource dependence and the accumulation of physical and human capital in Latin America," Resources Policy, Elsevier, vol. 37(3), pages 281-295.
    3. Anna Mishura & Svetlana Ageeva, 2016. "Regional distribution of bank institutions in Russia: Role of state and education," ERSA conference papers ersa16p167, European Regional Science Association.
    4. Shahbaz, Muhammad & Naeem, Muhammad & Ahad, Muhammad & Tahir, Iqbal, 2018. "Is natural resource abundance a stimulus for financial development in the USA?," Resources Policy, Elsevier, vol. 55(C), pages 223-232.
    5. Kolstad, Ivar & Wiig, Arne, 2012. "Testing The Pearl Hypothesis: Natural resources and trust," Resources Policy, Elsevier, vol. 37(3), pages 358-367.
    6. repec:eee:jrpoli:v:53:y:2017:i:c:p:164-172 is not listed on IDEAS
    7. Hattendorff, Christian, 2014. "Natural resources, demand for external finance and financial development," Discussion Papers 2014/33, Free University Berlin, School of Business & Economics.
    8. Moradbeigi, Maryam & Law, Siong Hook, 2016. "Growth volatility and resource curse: Does financial development dampen the oil shocks?," Resources Policy, Elsevier, vol. 48(C), pages 97-103.
    9. Kurronen, Sanna, 2015. "Financial sector in resource-dependent economies," Emerging Markets Review, Elsevier, vol. 23(C), pages 208-229.

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