Countries endowed with rich natural resources such as fuels and minerals often fall behind in human development. Does resource endowment hamper human capital development in China, a country that hosts rich resources in many of its regions? Through cross-regional and longitudinal statistical analysis and field research in selected mining areas, this study finds that resource dependence reduces government expenditure on human capital-enhancing public goods including education and health care. The local economic structure and reduced demand for labour, the shifting of government responsibilities onto mining enterprises, and the myopia of local residents and officials all discourage the local governments in resource-rich regions from investing in human capital.

This article compares two neighbouring underdeveloped counties in south-west China. They share many similarities in economic, political and demographic structures, but experience divergent levels of social instability. The comparison suggests that, under China's political system and cadre incentive structure, the endowment of mineral resources in one county, and the lack thereof in the other, significantly influences the modes of economic development and local governance in these two counties, and thus contributes to their different levels of social instability.