How Natural Resources Affect Welfare of the Underprivileged in China

• In Event: Rethinking Rentierism: Global Perspectives, Changing Realities (Virtual Session)

Abstract

How does natural resource endowment affect welfare distribution in an authoritarian country? In this study, we explore the effect of resource-dependent economic activities on economic and social conditions across social groups in China, using micro-data on natural resources coupled with county-level and individual-level statistics. We focus on the effect of natural resource production on socially underprivileged groups in China such as ethnic minorities, rural population, poor population, and female labor. Our theory predicts that the negative effects of natural resources are greater for the underprivileged population, due to institutional and social constraints that limit economic opportunities for the minorities. To test this theoretical claim, we analyze how local governments' social welfare spending and individual economic conditions have differed with natural resource production across Chinese localities and individuals. Our findings show that natural resource production does not improve, or necessarily undermine, the welfare of areas and individuals of socially underprivileged characteristics. We also find that the effects on social welfare vary substantially depending on the type of exploited natural resources.

Authors

• Ji Yeon (Jean) Hong, University of Michigan

• Wenhui Yang, University of Texas at Austin