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Title:Creative destruction and fiscal institutions: A long-run case study of three regions PDF Logo
Authors:Schnellenbach, Jan
Baskaran, Thushyanthan
Feld, Lars P.
Issue Date:2009
Series/Report no.:Papers on economics and evolution 0908
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.
Subjects:structural change
scal federalism
grants in aid
creative destruction
JEL:E63
E64
H77
H54
Document Type:Working Paper
Appears in Collections:Papers on Economics and Evolution, MPI für Ökonomik

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