Resources Policy 66 (2020) 101644

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Resources Policy
journal homepage: http://www.elsevier.com/locate/resourpol

Natural resource endowment, institutional quality and China’s regional

economic growth
Qiu Qiang *, Chen Jian
College of Economics and Management, Nanjing Forestry University, Nanjing, Jiangsu, 210037, China

A R T I C L E I N F O A B S T R A C T

Keywords: The provincial panel data from 2005 to 2018 in this paper classifies institutional variables into the degree of
Economic growth market resource allocation, market openness, and property rights diversification. It empirically analyzes the
Institution relationship between economic growth, natural resources, and institutions quality. The research results show
Natural resource endowment
that the “resource curse” proposition is valid at the provincial level in China. The low-quality market resource
Resource curse
allocation system and property rights system curbed the potential advantages of natural resources to promote
economic development and caused the “resource curse” effect. Similarly, the increase in market openness can
ease the “resource curse” effect. Moreover, in the context of the spatial agglomeration of natural resources, there
is a negative spatial correlation between economic growth, and the “resource curse” effect is more severe in areas
where resources are more abundant. In addition, it is found that natural resource endowments will affect the
quality of the system. Under the effect of the causal cycle mechanism, the lower the quality of the system, the
more severe “resource curse” effect.

1. Introduction
Natural resources are the foundation of economic development.
Regions with abundant natural resources such as energy and minerals
can effectively convert resource advantages into economic development
advantages of the country or region by means of export trade. The
Keschel-Ohlin theory and the bulk product theory also believe that the
use of resource advantages can effectively promote regional economic
development. However, the role of natural resources does not seem to be
very important in some regions. Even in some regions, natural resources
have negative impact on their economic growth (Xue et al., 2019). For
example, regions which have abundant natural resources (Nigeria,
Venezuela, Netherlands, etc.) have worse economic development than
countries with relatively scarce natural resources (Switzerland, Japan,
South Korea, etc.). From experience, there seems to be a scourge of
“resource curse” in the region of China. Both Shanxi and the three
eastern provinces are rich places, but the level of economic development
has been downstream for a long time. Coastal areas with relatively poor
resources, such as the Jiangsu and Zhejiang regions, Economic growth
performance often tops in China (Deng et al., 2019). With deepening of
reform and opening up, many Chinese regions have mobilized people to
develop natural resources on a large scale, which has effectively
improved the level of industry. When people enjoy the material civili­
zation brought about by rapid development, environmental disasters
such as air pollution (such as smog) and water pollution are “behind
soldiers”. It seriously threatens the survival and development of the
people. Dose abundant natural resources have beneficial or disadvan­
tageous to regional economic development? The academic community is
divided, and the paradox propositions about the “resource gospel” and
“resource curse” have become a major focus of continuous attention and
controversy in such disciplines as regional economics.
China’s natural resources are extremely unevenly distributed. There
are obvious rich areas and poor areas. Central and western regions have
abundant natural resources, while resources in the eastern regions are
relatively scarce. However, in the long run, the growth gap between
these regions is constantly expanding, eastern regions economic growth
level is far ahead of the central and western regions. At present, the
manufacturing industry in the developed coastal areas has formed a
certain scale, the productive service industry is gaining momentum, the
level of urbanization is high, the ecological environment has been
significantly raised, and the per capita income is high. However, due to
the resource-based industries formed mainly by resource development,
the central and western regions have a single economic structure, low
competitiveness in manufacturing and service industries, low levels of

* Corresponding author.
E-mail addresses: qiangqiunj@163.com (Q. Qiang), c.j1125@163.com (C. Jian).

https://doi.org/10.1016/j.resourpol.2020.101644
Received 21 January 2020; Received in revised form 27 February 2020; Accepted 27 February 2020
Available online 7 March 2020
0301-4207/© 2020 Elsevier Ltd. All rights reserved.
Q. Qiang and C. Jian
urbanization, and serious damage to the ecological environment, low
per capita income (Wang and Li, 2019; Zameer et al., 2020a).
Regional growth differences are mainly institution differences. The
development of natural resources will bring two effects, one is the
output effect, that is, the action leads to material output; the other is the
“institution effect”, that is, the action will institutions have a direct or
indirect impact. Natural resources have not been considered the gospel
of economic growth in the past, but now they have become a crisis in a
country or region. What deep meaning does it have? What kind of in­
fluence do the factors of institution change play in economic growth?
Along the lines of natural resource development, institutions and eco­
nomic growth, how to optimize the quality and structure of institutions
and resources and release the dividends of resources and institutions is a
question worthy of our consideration (Song and Li, 2019; Sala-i-Martin
and Subramanian, 2013).
In short, it is superior and realistic to explore and trace the rela­
tionship between natural resources and economic growth from the
perspective of the institution. However, this perspective needs to be
expanded and enlarged, and it should be deepened from a multidi­
mensional and closer to the actual level. Analyzing the “resource curse”
proposition, rather than simply treating the institution as a simple
control variable, and using a single indicator (such as an indicator of
corruption) to measure it. In terms of research mechanism, some
scholars believe that abundant natural resources have led to a reduction
in the quality of the institution, but if so, how to explain the situation in
North Korea and South Korea, North Korea and South Korea have great
similarities in natural resource endowments. Institutions have their own
characteristics, and there is great heterogeneity among them, so the
research mechanism needs to be further improved. Therefore, it is ur­
gent to take a more comprehensive view of the institution and adopt a
more convincing theoretical and empirical analysis method to re-
examine whether this proposition is more robust.
Therefore, the main contribution of this paper is that, from a theo­
retical perspective, the institution factors are included in the model to
discuss the quality of institution growth and economic growth. There are
more literatures, but few literatures discuss the “curse of resources” on
this basis; from a perspective, the existing domestic and foreign related
studies have adopted a single indicator to measure the quality of the
institution. This article will measure the quality of the institution from
multiple dimensions, and comprehensively reflect the quality of the
institution from the degree of market allocation of resources, the degree
of property rights diversification, and the degree of market openness. It
can improve the quality of empirical analysis and is a useful supplement
to existing research. Therefore, this paper uses provincial panel data
from 2005 to 2018 to classify institution variables into the degree of
market resource allocation, market openness, and property rights
diversification. An empirical analysis of the relationship between eco­
nomic growth, natural resources, and the institution, for each Regional
improvement of institutional quality and optimization of the institution
structure, and getting rid of the “trap” of the “curse of resources” provide
ideas.
2. Literature review
2.1. Impact of natural resources on economic growth
In the early research on the relationship between natural resources
and economic growth, mainstream economists generally believed that
for a country or region, abundant natural resources can have a signifi­
cant impact on economic growth (Shahbaz et al., 2019a,b; Ahmed et al.,
2016; Sinha et al., 2019). Shahbaz et al. (2019a,b) explored the relative
impact of natural resource abundance and natural resource dependence
on economic growth in 35 natural resource-rich countries between 1980
and 2015. The study found that rich natural resources promote eco­
nomic growth, but natural resource dependence hinders economic ac­
tivity. This study provides guidelines for using natural resources as
2
Resources Policy 66 (2020) 101644
economic tools to sustain economic development over the longer term.
Many other scholars have studied the impact of different types of natural
resources on economic growth (Kumar and Shahbaz, 2012; Satti et al.,
2014a,b; Shahbaz et al., 2015; Khan et al., 2016), and some others
Scholars have studied the relationship between natural resources and
financial development, which has indirectly affected economic growth
(Zafar et al., 2019; Shahbaz et al., 2018). Habakkuk (1962) believes that
through the exploitation, development and utilization of natural re­
sources the country can achieve capital accumulation and economic
growth relatively quickly. The US leadership in industrial production is
closely related to its production and development of resource products.
James and Aadland (2011) used the data of the county level in the
United States to test and found that resource-dependent counties
showed obvious weak economic growth, and there was a negative cor­
relation between natural resources and economic growth. The “resource
curse” proposition is at the county level in the United States. The same
holds true. Gylfasom (2000) attributes the prosperity of the Norwegian
economy to its successful management of abundant natural resources. In
the development of resources, Norway has used such a development
model in order to achieve an equitable intergenerational distribution of
oil rents. It will transfer resource rents collected from taxes and fees to
foreign bonds to avoid large changes in income. . Ferranti et al. (2002)
research found that the United States has achieved its industrialization
success precisely because of its full use of the fundamental role of its
mineral resources.
However, the relationship between natural resources and economic
growth has changed significantly after 1950 year; a lot of countries with
abundant natural resources have stagnated. So, scholars began to
explain this phenomenon. Auty (1993) first introduced the concept of
“resource curse”, Since then, many scholars have done empirical
research on “resource curse”, and most scholars affirmed the “resource
curse” is exists in many regions（Satti et al., 2014a,b; Wang et al.
(2019)）. The research by Sachs and Warner (2001) is the most
groundbreaking. By selecting data from 95 developing countries and
using natural resource abundance, investment, and market openness as
variables, the existence of the “resource curse” was verified. Later, other
scholars, such as Gylfason (2001) and Stijns (2005) also revealed the
“resource curse”. Papyrakis and Gerlagh (2001) using cross-section data
from different regions within the United States as a sample to verify that
the “resource curse” proposition is also valid within the United States.
The domestic academia’s research about “resource curse” is rela­
tively late, and most of them support this view, mainly using inter-
provincial panel data to verify the “resource curse” in China. Xu and
Wang (2006) first pioneered and verified that the “resource curse”
phenomenon is still valid in China. They believing the rich natural re­
sources in most provinces are not only a favorable factor, but a
constraint, which has dragged down economic development. Zhang
et al. (2007) studied the relationship between the five resources of
water, arable land, forest, minerals and energy and regional economic
development in one year, and found that except for water resources, the
other four resources are negatively related to regional economic growth
of research by Shao and Qi (2008) shows that energy development in
western China does produce a “resource curse” effect. Liu and Xu (2019)
analyzed the economic data of Yan’an from 2000 to 2016, they found a
significant positive correlation between the labor input, education input
and opening degree of Yan’an mining industry and natural resource
endowment is an important engine of its economic growth. Xie and Li
(2019) believe that the dependence on resources may erode a country’s
investment convenience, and then hinder productive investment, which
provides a new mechanism for the “resource curse”. Countries that can
make the most of the advantages of natural resources can lay the
foundation for sustainable development, but “government failure”
caused by resource dependence may pose challenges to long-term eco­
nomic growth.
Q. Qiang and C. Jian
2.2. Impact of the Institutional quality on economic growth
The above analysis has analyzed that the reserves of natural re­
sources impact on economic development, and related Institution is also
important in the development and operation of the economy. The neo-
institution school put forward the viewpoint that the institution is
more important than technology, and absorbed the institutional quality
elements into the theory of economic growth. They believed that the
institution reason was the decisive factor leading to economic growth.
The traditional perspective only focuses on analyzing the decisive role
played by natural resources in economic development, and ignores other
influencing factors. Some scholars have studied the relationship be­
tween institutions and environmental quality. For example, Sinha et al.
(2019) used corruption to represent institutional variables, and studied
the impact of public sector corruption on environmental quality: Impact
of sustainability. Yasmeen et al. (2019) highlighted the role of govern­
ment institutions toward environmental sustainability. The research
results of Sun et al., 2019 show that the external institution demand
brought by urban foreign trade will promote urban economic growth by
promoting the improvement of urban institutions, and that the general
trade of local companies starts in the process of promoting urban eco­
nomic growth through institutional channels plays a major role. Huo
and Fang (2019) found that institutional quality is an important channel
for capital account opening to promote economic growth. Zameer et al.
(2020b) indicated the role of regulatory pressures. Hu and Zhang (2010)
also pointed out that the institution as a factor of production will have a
direct effect on economic development. The second is to indirectly affect
economic growth by acting on capital, technology and other factors; Li
and Dong (2008) introduced the institution to the growth model and
examined the relationship between each factor and the economic
growth, and found that the institution, capital, and technology can affect
the economy increase. When further exploring the relationship between
the institution and other factors, it was found that the institution acts on
economic growth in two ways, directly or through indirect effects on
factor growth and allocation efficiency.
2.3. Impact of abundance of natural resources on the institutional quality
At the same time, we should note there are some links between
abundance of natural resources and the institution, and the abundance of
resources will in turn affect the construction of the institution. In this
theory, resources do not directly affect economic development. Instead,
they use the institution as an intermediate medium. Through the insti­
tution as a carrier, rich natural resources weaken the institution, thereby
affecting economic development through the evolution of the institution.
Ross (2001) based on this, further examined the impact of various natural
resources on the national institution, and finally concluded that the de­
gree of democracy in countries that rely too much on exports of minerals
or oil is not high, while other categories of primary products is no obvious
correlation with the degree of national democracy. Rigobon and Parsons
(2006) believed that when the personnel appointment institution and
resource management institution of the public ministry were poor, in
order to obtain the support of sponsors and re-election the political search
for officials will cause more patrons to flood into the resource sector, and
the gap will gradually widen. Lu (2019) believes that the initial institu­
tion conditions not only failed to effectively resist or avoid the inherent
vulnerability of the resource economy, but also greatly exacerbated the
negative spillover of this uncertainty; thereby improving the institution’s
evolution to positive performance. Cost, and ultimately lead to the
long-term “lock-in” of the political economy of the resource country in a
low-level equilibrium that deviates from sustainable development. Meng
et al. (2019) found that the Beijing-Tianjin-Hebei regional government
coordination model in cross-border air pollution is a “passive response
collaboration” model. This model is the institution environment and
governance resources of the Beijing-Tianjin-Hebei government’s rational
choice under double constraints. Although the “passive response
3
Resources Policy 66 (2020) 101644
synergy” model can obtain short-term legitimacy feedback in dealing
with the Beijing-Tianjin-Hebei transboundary air pollution problem, its
cost is huge and it cannot obtain sustained synergy effects.
These institution -based theoretical models explain the curse of re­
sources from another angle. The problems that occur in areas with
abundant natural resources are not the resources themselves. Natural
endowments cannot be changed to a large extent through human re­
sources, but the institution approach to natural human rights is greatly
Affects economic development.
3. Models and methods
3.1. Data source
This article takes a sample of 30 provinces, cities, and autonomous
regions in mainland China as the research object (the natural endow­
ments and institution of Chongqing and Sichuan are similar, and the
continuity of data is also considered, so Chongqing and Sichuan are
merged into one region for research) Using the sample interval from
2005 to 2018, the panel data set includes time series data of 30 cross-
section units within 14 years, and a total of 420 sample observations.
The data in the article are from China Statistical Yearbook, New China
60 Years of Statistical Data Collection, China Labor Statistics Yearbook,
China Fixed Asset Investment Statistics Yearbook, China Industrial
Economic Statistics Yearbook, China Energy Statistics Yearbook, China
Coal Industry Statistical Yearbook, China Petroleum and Natural Gas
Industry Yearbook, and China Economic Net Statistics Database and
related data terminals, etc., some data authors calculated based on
formulas.
3.2. Theoretical framework
The essence of the “resource curse” is that the short-term prosperity
of the resource industry inhibits the innovation activities of the entire
society, including enterprises and governments. The main driving forces
of industrial development and economic growth are entrepreneurial
innovation, technological progress and institution innovation, but the
short-term benefits brought by resources have inhibited the generation
of these driving forces.
First, due to the relatively short-term rate of return of resource
production, the capital invested in resource production has a higher
return on investment, which causes production factors such as capital
and labor to further converge on the industry, causing crowding out of
other industries effect, resulting in the simplification, primaryization
and rigidity of the economic structure, so that the role of the forward and
backward linkage of the entire industrial chain is not fully developed.
Too much concentration of resources in the primary product production
sector will compress the development of the final product production
sector with high technological content and added value, and these sec­
tors are the basis for undertaking technological innovation and organi­
zational change and even cultivating entrepreneurial innovation.
Second, the huge benefits brought by abundant natural resources can
often allow the government to have sufficient capital without the need
to promote short-term social and economic development through insti­
tution innovation and institution construction, thereby reducing the
incentive for government institution innovation and indirectly affecting
social and economic activities Innovation has a negative impact. Under
the management of a government that lacks the motivation for institu­
tion innovation, it is bound to be opportunistic. Officials and business­
men have sought ways to conduct rent-seeking activities instead of
creating a healthy social institution for fair competition. And when the
government and businessmen’s ideological activities change from
improving institution, maintaining order, and entrepreneurial innova­
tion to corruption and rent-seeking behavior, the overall economic ef­
ficiency of society will greatly decline and the long-term economic
growth rate will inevitably decline.
Q. Qiang and C. Jian Resources Policy 66 (2020) 101644

Third, the rapidly prosperous resource industry and rolling resource Institution economics believes that a country’s basic institution,
wealth have inhibited the vitality of innovation, deteriorated the inno­ institutional structure, institution framework, institution environment,
vation environment, stifled the innovation culture, lost the creative and institution direction determine its economic performance. Accord­
talents, and led to the decline of economic innovation capacity and ing to the practice of the reform and development of China’s market
innovation activities. At the same time, it also locked the path of eco­ economy institutional, and considering the availability of data, we
nomic development, formed path dependence and locked industrial di­ choose the following three proxy variables to measure the institution
vision of labor, formed a rigid pattern of industrial division of labor, variables:
locked the development model, formed a serious external diseconomy First, the degree of market allocation of resources (MS).
and the decline of development capabilities, which in turn affected in­ The allocation of resources in China’s market is mainly reflected in
dustrial competitiveness and the economy sustainable development. A cities, especially some large cities. The ability to allocate resources in
large number of case study results have confirmed that almost all rural areas is relatively low and to a low degree. In terms of content,
countries that have experienced the “resource curse” phenomenon are market allocation of resources is mainly reflected in fiscal intervention
overly dependent on large-scale development of resources, allowing and land markets. As the resource allocation capacity of the land market
resource advantages to rag, hinder innovation and technological prog­ is not easy to measure, the author follows the practice of scholars such as
ress, and reduce the ability of sustainable economic development, and Fan Gang et al. (2001), Liu and Liu (2019) to measure the degree of
decrease the rate of technological progress and the increase in total market allocation of resources by the ratio of fiscal expenditure to
factor productivity, so that on the long-term data of economic growth, regional GDP (MS) The higher the indicator, the lower the degree of
economic development and resource abundance show a negative rela­ market resource allocation.
tionship. In view of this, this article believes that the “resource curse” is Second, the degree of property rights diversification (NS).
not only reflected in economic growth, but also in the specific economic Scott’s theorem emphasizes that once the market economy is deter­
growth mode, that is, the efficiency of economic growth. The so-called mined, property rights are effective, and clear property rights have the
“resource curse” is not only manifested in the negative relationship functions of incentives, constraints, resource allocation, and coordina­
between resource abundance and economic growth, but also should be tion. At present, the state has carried out reforms on property rights,
reflected in the relationship between resource abundance and techno­ especially the reform of the land transfer institution in rural areas. It may
logical progress in economic development and the increase in total release a big reform dividend (Li, 2019). This article selects the ratio of
factor productivity, that is, rich The impact of resources on a country’s the number of employees in urban state-owned units to the number of
institution and industrial structure may inhibit innovation, which does urban employees as the ratio measure of the degree of diversification of
not bring about technological progress, nor does it increase total factor property rights.
productivity, and will eventually weaken the sustainable development Third, the current economic theory of market openness (MI) shows
of industry and economy. that growth of regional economy is closely related to openness. Gener­
ally, in areas where the process of externalization is fast, its economic
growth rate is relatively high. The level of foreign investment in a region
3.3. Variable selection reflects the degree of openness of the market to a certain extent, and
reflects the strengths and weaknesses and maturity of its market envi­
(1) Actual output ronment (Zheng, 2019). Therefore, the ratio of foreign direct investment
to the region’s GDP (MI) is used to measure market openness.
Actual output Y is expressed by the GDP of each region in the past Based on the above analysis, the indicator institution is constructed
years, and the corresponding conversion was made with 2005 as base as follows Table 1:
period; the physical capital stock is calculated by perpetual inventory
method, the data from 2010 years ago are calculated using the algo­
rithms of Shan (2008). The capital depreciation rate of each province is
10.96% (Shan, 2008). The capital stock from 2005 to 2018 is supple­
mented by the exponential smoothing method. The unit of the physical Table 1
capital stock K is the labor stock L is represented with number of Index institution.
employed persons in each region (the unit is 10,000 people). In this
Variable Explanation of indicators Data Sources
paper, the physical capital stock K and the labor stock L are included in
the measurement model as control variables. Exploratory Actual output Expressed by GDP of each Statistical
variable region over the years Yearbooks by
（Y） Region
(2) Selection of Natural Resource Abundance (RES) Abundance of Conversion with China Energy
natural resources standard coal of raw coal, Statistical
Due to the large regional differences in energy distribution, which crude oil and natural gas Yearbook
can better reflect the characteristics of natural resource endowment in a （RES）
Explanatory Degree of market Ratio of regional fiscal Statistical
region, this paper uses energy abundance to indicate the level of regional variables allocation of expenditure to GDP of Yearbooks by
natural resource endowment. Here, the research method of Zhang and resources the region（MS） Region
Liang（2010）is used to measure the regional energy abundance. Diversity of Ratio of employees in Statistical
property rights urban state-owned units Yearbooks by
ω1 *coal þ ω2 oil þ ω3 naturegas to urban employment Region
RES ¼ (1) （NS）
coal þ oil þ naturegas
Market openness Foreign direct Statistical
Among them, ω1, ω2, and ω3 represent the reference coal conversion investment as a Yearbooks by
standards for raw coal, crude oil, and natural gas (the reference co­ percentage of the Region
region’s GDP (MI)
efficients for the conversion of raw coal, crude oil, and natural gas
Control Capital Physical capital stock K Statistical
standard coal published in China Energy Statistical Yearbook 2013 are: variable Yearbooks by
0.7143, 1.4286, and 1.33), Oil and natural gas represent the proven Region
reserves of coal, oil and natural gas in each region. Labor force Labor stock L Statistical
Yearbooks by
Region
(3) Selection of institution variables

4
Q. Qiang and C. Jian Resources Policy 66 (2020) 101644

3.4. Model construction between the two variables to the product of the standard deviation.
which is
In order to study institutional quality and abundance of natural re­
covðX; YÞ EðX μX ÞðY μY Þ
sources impact on economic growth, combined with the above theo­ ρXY ¼ ¼ (6)
σX σY σX σY
retical economic implications, this article establishes the following basic
econometric model: The above formula defines and explains the overall correlation co­
efficient, which is usually expressed by ρ (rho), while the sample cor­
lnYit ¼ C þ α1 lnRESit þ α2 lnKit þ α3 lnLit þ α4 lnϕit þ μit (2)
relation coefficient is usually expressed by r:
In the above measurement equation, the meanings of the symbols are P n
as follows: The subscript i indicates the region, t indicates the year, Y ðXi XÞðYi YÞ
indicates the actual output, RES indicates the abundance of natural re­ r ¼ rffiffinffiffiffiffii¼1
ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffirffiffinffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi (7)
P P
sources, K indicates the physical capital stock, L indicates the labor ðXi XÞ2 ðYi YÞ2
stock, and ϕ indicates the institution. It is represented by three proxy i¼1 i¼1

variables; α1, α2, α3, and α4 represent the coefficients of each explan­ Assuming the sample is ðXi ;Yi Þ, the Pearson correlation coefficient of
atory variable, C is a constant term, and μ is a random error term. The the sample is:
theoretical model indicates that the production behavior of the natural n � �� �
resource development sector is affected by the quality of the institution, 1 X Xi X Yi Y
r¼ (8)
so we consider the interaction between the institution and natural n 1 i¼1 sX sY
resource elements. Specifically, the cross of the logarithm of the insti­ Xi X
Among them, ， X and sX are standardized variables, sample
tution variable and the logarithm of the natural resource element is sX

crossed. The terms are incorporated into the econometric model, which
results in the econometric model:
lnYit ¼ C þ α1 lnRESit þ α2 lnKit þ α3 lnLit þ α4 lnMSit ⋅lnRESit
þ α5 lnNSit ⋅lnRESit þ α6 lnMIit ⋅lnRESit þ μit (3)
In the above measurement equation, the meanings of each symbol
are as follows: The subscript i indicates the region, t indicates the year, Y
indicates the actual output, RES indicates the abundance of natural re­
sources, K indicates the physical capital stock, L indicates the labor
stock, and MS indicates the market allocation Degree, NS indicates the
degree of diversification of property rights, MI indicates the degree of
market openness, α1, α2, α3, , α4, α5, and α6 indicate the coefficients of
each explanatory variable, C is a constant term, and μ is a random error
term.
3.5. Variable test
(1) Fisher-ADF test
The null hypothesis H0 is the existence of a unit root.
X
N b and b
ADF Fisherχ 2 ¼ 2 log pi →χ 2 ð2NÞ (4)
i¼1
mean and sample standard deviation.
(3) Co-integration test
Engle and Granger, 1987 defined and explained the concept of
co-integration; the cointegration relationship mainly reflects the stable
dynamic equilibrium relationship between two linearly increasing var­
iables. Co-integration analysis is developed on the basis of vector
autoregressive analysis of time series. The corresponding theoretical
model is:
If the time series Y1t ，Y2t ，⋯，Ynt are all d-order single integers,
that is, I (d), there exists a vector α ¼ðα1 ，α2 ，⋯，αn Þ such thatαYt eId
b, where Yt ¼ Y1t ，Y2t ，⋯，Ynt ，d � b � 0. Then the sequence
Y1t ，Y2t ，⋯，Ynt are (d, b) -order cointegration, denoted as Yt eCId b,
and α is the cointegration vector. In general, the cointegration test has
the EG two-step method and multivariate maximum likelihood method.
Step 1. Select the variable Yt to perform OLS regression on Xt, that is,
there is a cointegration regression equation:
Yt ¼ α þ βXt þ εt (15)
In the formula, the estimated values of the regression coefficients are
represented by α β, and the estimated residual value of the model is:
ε ¼ Yt
b α
b b
βXt (16)

1 X
N
ADF ChoiZ ¼ pffiffiffiffi φ 1 pi →Nð0; 1Þ (5)
N i¼1 Step 2. Use the ADF test to perform the unit root test on the residual
term εt . If the test result shows thatεt is an I (0) sequence, that is, bε eIð0Þ,
where Φ 1(⋅) express the inverse of the cumulative function of the
then εt is a stationary sequence, and Yt and Xt are CI (db) For cointe­
standard normal distribution.
gration, the cointegration vector isð1; b
βÞ.
(2) Variable autocorrelation test
4. Results
In order to avoid the problems of multicollinearity and endoge­
nousness among different explanatory variables, in the preparation 4.1. Descriptive statistics of variables
stage of regression analysis, the correlation between each variable needs
to be analyzed. This article chooses the Pearson product moment cor­ From Table 2, we can see that the gap between the maximum value
relation coefficient verification method. The value of the correlation and the minimum value of the variable is relatively large. For example,
coefficient ranges between 1 and 1. If the value is 1, it can be deter­ the minimum value of natural resource endowment is 0.121, and the
mined that there is a linear relationship between the two variables, that maximum value is 12.237. The large difference indicates that the
is, the variable. X is consistent with the change trend of the variable Y. resource gap across China is large. By the same token, institution vari­
When the value is 1, it means that all points lie on a straight line, which ables are also unbalanced in different regions, so it is necessary to
indicates that there is a negative correlation between the variable X and discuss the characteristics of different regions.
the variable Y. When the value is 0, it mainly manifests as a wireless
relationship between two variables. It is usually expressed by r or ρ.
From the calculation method, it is mainly the ratio of the covariance

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Q. Qiang and C. Jian Resources Policy 66 (2020) 101644

Table 2 Table 4
Variable descriptive statistics. Test results from ADF test.
Variable Samples Average Standard Minimum Maximum Variable Horizontal sequence First order difference Test Output
numbers value deviation
t statistic P value t statistic P value
Y 420 1.234 0.565 0.399 2.443
lnY 11.012 0.9987 307.322 0.0001 First-order stationary
RES 420 2.113 2.632 0.121 12.237
lnMS 16.431 0.1000 386.343 0.0000 First-order stationary
K 420 3.766 0.577 1.033 3.554
lnMI 54.014 0.5678 191.314 0.0000 First-order stationary
L 420 2.156 0.515 2.763 4.521
lnCOR 17.223 0.8891 334.891 0.0002 First-order stationary
MS 420 2.335 0.598 0.697 2.154
lnL 18.789 0.2891 277.341 0.0000 First-order stationary
NS 420 1.134 0.666 0.612 4.763
lnL 21.913 0.6535 567.912 0.0000 First-order stationary
MI 420 4.011 0.712 0.591 3.115

4.2. Autocorrelation test of variables Table 5

Co-integration test results.
This paper uses Pearson product moment correlation coefficient to
Statistics Value P value Test result
test, the results are shown in Table 3.
Kao test ADF 2.112 0.0007 cointegration not
Table 3 shows that the correlation coefficients of all variables are
found
lower than 0.4, which can exclude multicollinearity and endogenous Pedroni Panel v-Statistic 4.345 0.712 cointegration found
problems between variables, and can ensure unbiased regression. test Panel rho-Statistic 6.124 0.9433 cointegration found
Panel PP-Statistic 5.776 0.0002 cointegration not
found
4.3. Stationarity test results Panel ADF- 6.341 0.0002 cointegration not
Statistic found
This paper uses Eviews11.0 for ADF test. The results are shown in Group rho- 8.451 0.9177 cointegration found
Table 4. Statistic
Group PP-Statistic 11.231 0.0003 cointegration not
It can be found from Table 4 that all variables are first-order single found
integers, and a co-integration test can be performed to check whether Group ADF- 9.717 0.0006 cointegration not
there is a long-term equilibrium relationship and co-integrity between Statistic found
the variables.

in China is significant. Secondly, the table shows that the coefficients of

4.4. Co-integration test results
This paper uses Eviews7.0 to perform Pedroni test and Kao test on
variables. The test results are shown in Table 5 below.
It can be seen from Table 5 that the Panel ADF-Statistic, Group ADF-
Statistic, and ADF passed the significance test of 1% in the co-integration
test results of the actual GDP and the explanatory variables. There is a
co-integration relationship, and regression analysis can be performed. .
4.5. 5Analysis of ordinary panel estimation results
The unit root test and cointegration test above show that there is a
robust correlation between the explanatory variables and each economic
variable, so regression can be performed. By comparing the superiority
of the estimation results of different panel data models and considering
the role of individual dummy variables, we consider that the cross-
section model of mixed regression is more suitable. Therefore, we use
the mixed regression method to estimate the sample.
The empirical result in Table 6 shows a good estimation effect, and
significance level test is generally high. First, we observe the coefficients
of ln RES and find that the coefficient values in models (1) to (6) are all
negative and significant. From this we conclude “resource curse” effect
ln MS are all negative values, then it can be judged that the lower degree
of market allocation of resources leads to lower economic growth per­
formance, and the coefficients of ln NS are also negative values, indi­
cating that lower levels of property rights are diversified. The degree
also restrains economic growth, and the coefficient of ln MI is a positive
value, which indicates that an increase in market openness can help
economic growth. ln MS, ln NS, and ln MI are the three measures of the
institution. Their coefficients and their relationship with economic
growth reflect the quality and structure of the institution, which play a
significant role in economic growth and socio-economic development.
In order to reflect the mechanism of action between the institution and
the curse of resources, we multiply the logarithmic values of the three
variables of the institution and the logarithm of the abundance of nat­
ural resources as cross-terms and incorporate them into the measure­
ment equation to obtain the model (3) 4), (5), (6). From the results of
models (3), (4), (6), the cross terms ln MSlnRES and ln NSlnRES co­
efficients are negative, and models (2) and (3) and models (2) and (4)
are compared. We found that after adding ln MSln RES and ln NSln RES,
the coefficients of ln RES decreased from 0.017 to 0.082 and 0.036,
respectively, and the coefficients of ln RES were significant, indicating a
low-quality market allocation. The resource institution and property
rights institution exacerbated the “resource curse” effect, resulting in

Table 3
Correlation test results of various variables.
Variable Actual Abundance of natural Degree of market allocation Diversity of Market Physical capital Labor
output resources of resources property rights openness stock stock

Actual output 1 0.117*** 0.213*** 0.109*** 0.134 0.218** 0.156***

Abundance of natural 0.117*** 1 0.332*** 0.016** 0.122 0.213* 0.017
resources
Degree of market allocation 0.213*** 0.332*** 1 0.124*** 0.117*** 0.246*** 0.227***
of resources
Diversity of property rights 0.109*** 0.016** 0.124*** 1 0.237*** 0.144*** 0.188***
Market openness 0.134 0.122 0.117*** 0.237*** 1 0.178*** 0.223
Physical capital stock 0.218** 0.213* 0.246*** 0.144*** 0.178*** 1 0.177***
Labor stock 0.156*** 0.017 0.227*** 0.188*** 0.223 0.177*** 1

***, **, * indicate significant at 1%, 5%, and 10% levels, respectively.

6
Q. Qiang and C. Jian Resources Policy 66 (2020) 101644

Table 6
Ordinary panel estimation results.
Variable model（1） model（2） model（3） model（4） model（5） model（6）

lnK 0.663*** (4.341) 0.598*** (9.565) 0.621*** (3.135) 0.584*** (6.345) 0.592*** (3.223) 0.574*** (7.178)
lnL 0.352*** (6.432) 0.292*** (2.921) 0.284*** (2.443) 0.297*** (6.163) 0.295*** (5.121) 0.347*** (4.154)
lnRES 0.045*** ( 3.123) 0.0123** ( 1.671) 0.082*** ( 6.231) 0.036*** ( 5.361) 0.023*** ( 4.133) 0.106*** ( 3.164)
lnMS 0.176*** ( 4.351) 0.256*** ( 7.323) 0.193*** ( 8.663) 0.168*** ( 3.255) 0.218*** ( 7.452)
lnNS 0.293*** ( 8.991) 0.357*** ( 6.251) 0.385*** ( 4.617) 0.275*** ( 9.009) 0.415*** ( 5.331)
lnMI 0.054*** (4.239) 0.065*** (3.668) 0.051*** (2.552) 0.047*** (5.512) 0.036*** (3.228)
lnMS⋅lnRES 0.052*** ( 9.614) 0.055*** ( 6.151)
lnNS⋅lnRES 0.021*** ( 1.12) 0.035* ( 1.171)
lnMI⋅lnRES 0.0023 ( 1.17) 0.013* ( 1.833)
C 1.344** ( 2.221) 0.935*** ( 4.113) 1.265*** ( 8.998) 0.865*** ( 5.657) 0.987*** ( 7.657) 1.345*** ( 6.123)
R2 0.9102 0.9245 0.9343 0.9339 0.9335 0.9687
F 2598.09 1843.98 1598.04 1843.88 1499.23 1518.54
OBS 420 420 420 420 420 420

slower regional economic growth and even stagnation and regression of
economic development. From the model (6), the coefficient of ln MIln
RES is positive, which shows that the improvement of market openness
can weaken the “resource curse” effect, which is a favorable factor for
regional economic growth.
A complete market economy institution is an important guarantee
for the transformation of the mode of economic growth. An incomplete
institution is not only detrimental to regional economic development,
but also a hindrance to promoting economic structural transformation in
the context of the new normal, especially the relatively poor quality of
the institution. In terms of resource-based regions, the weakening of the
institution may increase the risk of “resource curse” effects in resource-
based regions. Therefore, an examination of the “resource curse” prob­
lem under the condition of considering the institution will undoubtedly
help to deepen our insight and understanding of the occurrence mech­
anism of this paradox phenomenon. This is an innovative point of this
article. Rich research has been carried out in the field (Shahbaz et al.,
2019a,b; Zafar et al., 2019; Sachs and Warner, 2001), but merely using
the institution as a control variable does not reflect the institution ‘s
curse on resources more accurately.influences. The development of
natural resources in China started late, and the understanding of the
“relative limitation” of resources is not deep enough. To a certain extent,
the role of natural resources in promoting and restricting economic
growth has been ignored. It is necessary to incorporate resource ele­
ments into the model. This article incorporates multi-dimensional
institution factors into the model, and considers the process of institu­
tion change, so as to theoretically discuss the “resource curse” problem,
which is relatively large compared with previous scholars’ research.
Difference (Shao and Qi, 2008; Huo and Fang, 2019). This article be­
lieves that the main reason is that we have not provided appropriate
institution space for economic transformation of these resource-based
regions. Extensive and simple resource development methods and
rigid institution have tied these regions, and local governments have
intervened too much to promote them. Resource-based products nor­
mally participate in market competition, resulting in distortion of the
price signal of the resource institution. In the case of large commodity
price volatility, regional economies with severe resource dependence
will be severely damaged, and there will be leakages in the institution.
As a result, resource-based state-owned enterprises have monopoly
rights over resources, resource property rights are unclear, and re­
sources are disorderly developed, resulting in a large number of prob­
lems such as corruption and unfair competition, which have seriously
affected the healthy development of the market economy.
5. Conclusion and countermeasures
5.1. Conclusion
Good institution arrangements can promote economic growth and
are a helper to promote the transformation of natural resource
advantages into economic advantages. On the contrary, poor institution
mechanisms can inhibit economic growth, hinder the use of resource
advantages, and exacerbate the “resource curse” effect. This article’s
provincial panel data from 2005 to 2018 divides the institution variables
into the degree of market resource allocation, market openness, and
property rights diversification. It empirically analyzes the relationship
between economic growth, natural resources, and institutions, and
draws conclusions. The main factors are: (1) the resource curse effect is
significantly established at the provincial level in China; (2) the lower
level of market allocation of resources leads to lower economic growth
performance; (3) the lower level of diversification of property rights It
has also curbed economic growth, and an increase in market openness
can promote economic growth. (4) The low-quality market allocation of
resources and property rights institution exacerbated the “resource
curse” effect, resulting in slower regional economic growth and even
make economic development stagnation and regression; (5) The in­
crease of market openness can weaken the “resource curse” effect, which
is a favorable factor for regional economic growth.
5.2. Suggestion
In order to avoid the “resource curse” dilemma in the development of
regional economy in China, and to turn the negative “resource curse”
effect into a positive “resource gospel” effect, this article puts forward
the following policy suggestions based on the institution.
First, vigorously deepen the reform of state-owned enterprises,
especially resource-based state-owned enterprises. The empirical evi­
dence of this article proves that resource development has the greatest
negative impact on economic growth by weakening ownership reforms.
Therefore, in order to avoid the adverse effects of resource development,
we must first accelerate the reform of ownership. It is necessary to
rationally allocate state-owned capital, clean up and withdraw ineffi­
cient enterprises from state-owned enterprises, and invest more state-
owned capital in key areas such as basic and public welfare and in­
dustries that can become the supporting industry in the future. At the
same time, we must deepen the reform of the management institution of
state-owned enterprises and establish and improve a modern enterprise
institution. It is necessary to classify and advance the reform of mixed
ownership of state-owned enterprises and ultimately realize diversifi­
cation of equity. Particular attention should be paid to the reform of
resource-based state-owned enterprises. It is necessary to improve the
secondary market for special-purpose assets, establish a good market
price and competition mechanism, timely reflect the supply and demand
of special-purpose assets, reduce transaction costs for both parties, in­
crease opportunities for the recovery and reuse of tangible special-
purpose assets, and fully play a role in compensating for the cost of
sedimentation To alleviate the pressure of state-owned enterprise re­
form. It is necessary to formulate preferential policies for attracting
foreign capital and realize the diversification of property rights on the
premise of maintaining the state-owned capital holding position, and

7
Q. Qiang and C. Jian
then establish a relatively effective power balance mechanism and
incentive mechanism between shareholders and management. We will
improve the unemployment insurance, unemployment insurance, and
medical insurance institution where resources-based state-owned en­
terprises are located, and establish a multi-level social security institu­
tion to provide life support for laid-off employees in the process of
reforming resource-based SOEs to the greatest extent. Second, we must
encourage the development of non-state-owned economies, support the
development of small and medium-sized enterprises, and appropriately
lower the barriers to entry for non-state-owned enterprises, and attract
some high-tech industries to settle in regions.
Second, the development and production activities of some resource
industries are related to national strategic issues. Without prejudice to
national security, the barriers to entry for the natural resource industry
can be appropriately reduced, and the openness of institutions in the
resource field can be absorbed. On the basis of foreign funds and tech­
nology, improve the efficiency of resource development and utilization,
reduce the degree of environmental pollution, and try to avoid resource
leakage during the development of natural resources.
Third, improve the pricing mechanism for resource products. The
purpose of increasing the price reform of resource products is to enable
prices to fully reflect the scarcity of resources and the state of supply and
demand in the market. This is a core issue, and the first principle is to
play the role of the market in allocating resources. Specifically, it mainly
includes the following measures: relying on resources, taking the market
as the guide, scientifically defining resource cost elements; implement­
ing fiscal and tax policies to cultivate resource elements; establishing
resource-based enterprise development funds; strengthening the use of
policy regulations, and building a unified, open, Fair, competitive,
orderly, and effective resource development markets, the establishment
of resource cost factor formation mechanisms that reflect market supply
and demand conditions and the degree of resource scarcity, and greater
use of the market’s role in resource product price formation mechanisms
to improve resource allocation efficiency.
Forth, Increase human capital accumulation and investment in
technological innovation.Human capital accumulation and technolog­
ical innovation capabilities are the continuous driving force of modern
economic development. Human capital is relatively scarce in areas rich
in natural resources, and the allocation of human capital is unreason­
able. Because of relatively high profit margin of the natural resource
development industry, it has attracted more social human capital,
making the allocation of human capital in manufacturing and other
creative industries insufficient, and hindering the technological progress
of the entire society. At present, human capital in China with abundant
natural resources is poor, and it is difficult to provide intellectual sup­
port for industrial upgrading and technological innovation. Therefore,
areas with abundant resources must strengthen investment in education,
science and technology, cultivate excellent human capital, realize the
combination of natural resource advantages and scientific and techno­
logical progress, and promote the efficient economic development.
5.3. Limitation and outlook
(1) This article discusses the impact of the institution on the
“resource curse”. In summary, the institution here includes
property rights, markets, and factors in the political sense. In fact,
the government’s control and intervention of resource prices
caused the “resource curse” to occur. It is also very likely that
fluctuations in resource prices may lead to fluctuations in eco­
nomic output, and the impact of the price institution on the
“resource curse” cannot be ignored. These are topics that are
worth exploring.
(2) Institution change is an important content of institution eco­
nomics. With the advancement of history and time, the structure
of the institution will inevitably change, and under certain con­
ditions, the institution will break through the limitations of
8
Resources Policy 66 (2020) 101644
geographical space and spill over to other regions. Therefore, this
paper believes that it is necessary to use a spatial measurement
method to analyze the interaction between institution changes
and the “resource curse”, and use a more scientific method to
verify it. Although some studies have conducted preliminary
discussions on the spatial relationship between institutions and
the “resource curse” (Yang Lili et al., 2014), there are still many
issues that remain unresolved, such as different types of institu­
tion changes in the state of space (such as mandatory institution
change and induced institution change) will have a different ef­
fect on the “resource curse”? Will the natural resources of the
central area have a crowding out effect on industrial enterprises
and production factors in the marginal areas through spillovers?
Obviously, these issues need some theoretical research and
empirical analysis.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Acknowledgements
This research has been financed by Financial and Economics Devel­
opment Project of Jiangsu Social Science Application Excellent Project
in 2018 of Jiangsu Association of Social Sciences “Equity Incentive and
Management Behavior: A Study Based on Jiangsu Listed Compa­
nies”(18SCB-46); Higher Education Institution of Jiangsu Province in
2018 “Research on The Executive Results of Equity Incentive from The
Perspective of Management Power” (No. 2018SJA0135); Youth Science
and Technology Innovation Foundation of Nanjing Forestry University
in 2017 “Research on Equity Incentive of Listed Companies from The
Perspective of Executive Turnover” (No. CX2017016).
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