Does Financial Development Hamper or Improve the Resource Curse? Analysis Based on the Panel Threshold Effect Model

Abstract

This paper analyzes the “resource curse” and “financial threshold effect” that may exist in China and then uses the data from 30 provinces from 2004 to 2018 as research samples. We used linear regression and nondynamic panel threshold models to analyze the financial threshold effects of the “resource curse” hypothesis and the “resource curse” phenomenon. At the same time, we divided the level of financial development to verify the robustness of the research conclusions in this paper. The study found the following: (1) There is a certain correlation between the abundance of resources and economic growth. Whether this can be seen as a “curse” or a “blessing” of resources is significantly related to the degree of financial development. (2) Whether financial development can alleviate the “resource curse” depends on the degree of financial development. In the extremely scarce stage of financial resources, the resource endowment effect is obvious, and the level of economic development in resource-based regions will be higher than in other regions; when the level of financial development is low (financial resources are not scarce and have not reached a reasonable level), the phenomenon of the “resource curse” appears; when the level of financial development is highly developed, economic development benefits more from financial development, and the effects of resource endowment decline. Only when financial development is at a reasonable level can resource endowments effectively raise the level of economic development.