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Creative destruction and fiscal institutions: a long-run case study of three regions

Author Info

  • Lars Feld

    ()

  • Jan Schnellenbach

    ()

  • Thushyanthan Baskaran

    ()

Abstract

We analyze the rise and decline of the steel and mining industries in the regions of Saarland, Lorraine und Luxemburg over a long period, from the mid-19th century to 2003. Our main focus in on the period of structural decline in these industries after the second world war. Differences in the institutional framework of these regions are exploited to analyze how the broader fiscal constitution sets incentives for governments to either obstruct or to encourage structural change in the private sector. Our main result is that fiscal autonomy of a region subjected to structural change in its private sector is associated with a relatively faster decline of employment in the sectors affected. Contrary to the political lore, fiscal transfers are not used to speed up the destruction of old sectors, but rather to stabilize incomes.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00191-011-0264-y
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 22 (2012)
Issue (Month): 3 (July)
Pages: 563-583

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Handle: RePEc:spr:joevec:v:22:y:2012:i:3:p:563-583
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Order Information: Web: http://www.springer.com/economics/journal/191/PS2

Keywords: Structural change; Fiscal federalism; Grants in aid; Creative destruction; E63; E64; H77; H54;

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Find related papers by JEL classification:
  • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
  • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
  • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
  • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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Cited by:

  1. Berumen, Sergio A., 2012. "Evaluación del impacto de la política de incentivos sectoriales en el desarrollo de los municipios mineros de Castilla y León," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 17(33), pages 15-30.
  2. Thushyanthan Baskaran & Lars P. Feld & Sarah Necker, 2016. "Depressing Dependence? Transfers and Economic Growth in the German States, 1975-2005," CESifo Working Paper Series 6055, CESifo Group Munich.
  3. Baskaran, Tushyanthan & Feld, Lars P. & Schnellenbach, Jan, 2016. "Fiscal federalism, decentralization and economic growth: A meta-analysis," Freiburg Discussion Papers on Constitutional Economics 16/02, Walter Eucken Institut e.V..
  4. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2014. "Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201415.
  5. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo Group Munich.

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