Energy exploitation, learning by doing, and economic growth of energy-oriented regions

In this paper, a two-sector endogenous growth model of energy-oriented regions with a constant returns-to-scale manufacturing sector characterized as learning by doing effect and a labor-intensive energy-extracting sector characterized as accepting passively technical spillover from the manufacturing sector is developed. A mechanism interpretation of ldquoresource curserdquo faced frequently by energy-oriented regions is presented through market competition dynamic equilibrium and comparative static analysis of steady state solution on the relationship among energy exploitation, regional technical progress and economic growth. Our results indicate that energy exploitation is not necessary to be adverse to economic growth in energy-oriented regions, whether or not ldquoresource curserdquo appears in the energy-oriented economy depends on the quantitative relationship between the elasticity of substitution between production factors and the level of returns to scale in the energy-based industry. A lower complementarity between factors relative to the level of returns to scale can weaken learning by doing effect in the manufacturing sector and depress economic growth, while there is no curse in energy-oriented regions only if energy resource and labor are highly complementary inputs. Furthermore, the proposition is verified through empirical tests of panel data from 11 province-level districts in Western China.