How can local government capacity lift the 'resource curse'? A study from the perspective of industrial structure transformation.

Industrial transformation is crucial for sustainable urban development and economic security. Although more studies have analyzed the relationship between resource endowment and urban industrial transformation, they have failed to include the key factor of local government capacity in the analysis. Based on the panel data from 267 cities in China from 2003 to 2018, the study examines the impact of resource endowment on industrial transformation and the role of local government capacity in it by using linear models and panel threshold models. This study finds that resource endowment promotes the development of the secondary industry in urban, but hinders the development of the tertiary industry. There is a moderating effect of local government capacity that mitigates the lock-in effect of resource endowment on industrial transformation. This moderating effect demonstrates heterogeneity among cities with different levels of resource endowment and geographic locations, and the results are robust. Furthermore, this study concludes that under different local government capacity, the moderating effect of local government capacity on the relationship between resource endowment and industrial transformation is nonlinear, and it also finds that the stronger local government capacity is not the better.