Is China's demand shock in the raw materials market exporting a natural resource curse?

Yanbai Li

Research output: Working paperAcademic

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Abstract

This paper empirically investigates the macroeconomic impact that China’s soaring natural resource demand have in 100 developing countries under the proposition of the ‘resource curse’ with a shift-share design. By constructing a China shock variable that weights China’s multilateral imports of raw materials in six resource categories by each developing country’s exposure to the shock, I use a two-stage least-squares (2SLS) method in which multilateral natural resource exports is instrumented by the imputed China shock variable to estimate resource exports’ effect on growth. I also apply heterogeneity tests between periods of commodity price boom and collapse to avoid averaging out the overall effect of the resource-related variable. The results show that the resource boom brought about by the skyrocketing China demand derailed economic growth in developing countries between 1990 and 2013. I further test heterogeneity between sub-Saharan African (SSA) countries and non-SSA countries and find that the negative effect was more salient among SSA countries but non-significant among non-SSA countries.
Original languageEnglish
Place of PublicationDen Haag
PublisherInternational Institute of Social Studies (ISS)
Number of pages37
Publication statusPublished - Nov 2023

Publication series

SeriesISS working papers. General series
Number719
ISSN0921-0210

Bibliographical note

JEL classification: F14, F43, L70, O13

Series

  • ISS Working Paper-General Series

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