We are pleased to alert you to ISS working paper 719, entitled Is China's demand shock in the raw materials market exporting a natural resource curse?, by Yanbai Li.
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.
Resource curse, China shock, Shift-share design.
JEL classification: F14, F43, L70, O13
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