Creative Destruction and Fiscal Institutions: A Long-Run Case Study of Three Regions

Lars Feld, Jan Schnellenbach and Thushyanthan Baskaran

A chapter in The Two Sides of Innovation, 2013, pp 187-207 from Springer

Abstract: Abstract We analyze the rise and decline of the steel and mining industries in the regions of Saarland, Lorraine and Luxembourg. Our main focus is 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 the way in which the broader fiscal constitution sets incentives for governments either to 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 appear not to be used to speed up the destruction of old sectors, but rather to stabilize them.

Keywords: Structural change; Fiscal federalism; Grants in aid; Creative destruction (search for similar items in EconPapers)
JEL-codes: E63 E64 H54 H77 (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Creative destruction and fiscal institutions: a long-run case study of three regions (2012)
Working Paper: Creative Destruction and Fiscal Institutions: A Long-Run Case Study of Three Regions (2009)
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DOI: 10.1007/978-3-319-01496-8_10

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