Rebalancing and Regional Economic Performance: Northern Ireland in A Nordic Mirror
Graham Brownlow and
Economic Affairs, 2018, vol. 38, issue 1, 58-73
Northern Ireland has been characterised as having an excessively large public sector. This characterisation has led some to explain poor regional economic performance in terms of â€˜crowding outâ€™. This diagnosis has been used to justify a policy of â€˜rebalancingâ€™ and the region copying its southern neighbour's lower rate of corporation tax. The experience of large public sectors in the Nordic economies seems however to suggest that higher public spending is not necessarily damaging. This argument is examined critically. Rodrik's comparative institutional analysis indicates that in the Nordics a large public sector was the result of building a successful tradable private sector rather than its cause. In terms of the possible â€˜economic dividendâ€™ from devolution we suggest that a Hayekian insight is better: no â€˜silver bulletsâ€™ exist.
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