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This paper tries to shed light in the research that relates mining activities and regional diversification by studying how a group of local economies heavily specialized in mining diversified its economy after the ending of public subsidies that supported coal extraction. The case of study are the mining municipalities located in the center of Asturias (an autonomous region in Northern Spain), which constituted one the most important coal basins in the country. Although the extraction of coal was one of the main driving forces of the economic activity of the region, the mine pits were located in just a few municipalities across the territory. The economy of this area experienced the most severe effects produced by this policy, which started to be implemented in the early nineties and that gradually led to the cease of coal extraction in 2018. According to recent literature (see Fitjar and Timmermans, 2019), this shift in the public mining policy should have produced a greater diversification in the local economies previously specialized in mining activities, but a proper measurement of this effect can be problematic. Traditional methods, as difference-in-differences, are precluded due to the small number of spatial units directly affected by the treatment. This paper applies the estimation strategy proposed in Abadie and Gardeazabal (2003) of the Synthetic Control Method (SCM) to overcome this problem. The application of the SCM generates a weighted average of the untreated units (non-mining municipalities) that closely matches the treated unit over the pre-treatment period. Outcomes for this synthetic control are then projected into the post-treatment period using the weights identified from the pre-treatment comparison. This projection is used as the counterfactual for the treated unit. This methodology will be exploited together with rich historical data on local employment classified by industry, available for all the municipalities of the region for the period 1978-2018. The level of diversification on each area is quantified by calculating a Herfindahl-Hirschman Index (HHI), being this indicator the variable of interest. Taking the initial years of the 1990 decade as the break-point (when the policies of public support to coal extraction started to end), the application of this technique shows how this sped-up the diversification of the mining area, producing significant differences on the HHI with the counterfactual synthetic unit and indicating that the level of concentration of the economic activity is significantly lower than it would be if the mining activity had prolonged over time.

Mine closures and local diversification: Job diversity for coal-mining areas in a post-coal economy

Resource Key: HXFK3PZ6

Document Type: Journal Article

Creator:

Author:

  • Esteban Fernández-Vázquez

Creators Name: {mb_resource_zotero_creatorsname}

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Date: December 2022

Language: en

This paper tries to shed light in the research that relates mining activities and regional diversification by studying how a group of local economies heavily specialized in mining diversified its economy after the ending of public subsidies that supported coal extraction. The case of study are the mining municipalities located in the center of Asturias (an autonomous region in Northern Spain), which constituted one the most important coal basins in the country. Although the extraction of coal was one of the main driving forces of the economic activity of the region, the mine pits were located in just a few municipalities across the territory. The economy of this area experienced the most severe effects produced by this policy, which started to be implemented in the early nineties and that gradually led to the cease of coal extraction in 2018. According to recent literature (see Fitjar and Timmermans, 2019), this shift in the public mining policy should have produced a greater diversification in the local economies previously specialized in mining activities, but a proper measurement of this effect can be problematic. Traditional methods, as difference-in-differences, are precluded due to the small number of spatial units directly affected by the treatment. This paper applies the estimation strategy proposed in Abadie and Gardeazabal (2003) of the Synthetic Control Method (SCM) to overcome this problem. The application of the SCM generates a weighted average of the untreated units (non-mining municipalities) that closely matches the treated unit over the pre-treatment period. Outcomes for this synthetic control are then projected into the post-treatment period using the weights identified from the pre-treatment comparison. This projection is used as the counterfactual for the treated unit. This methodology will be exploited together with rich historical data on local employment classified by industry, available for all the municipalities of the region for the period 1978-2018. The level of diversification on each area is quantified by calculating a Herfindahl-Hirschman Index (HHI), being this indicator the variable of interest. Taking the initial years of the 1990 decade as the break-point (when the policies of public support to coal extraction started to end), the application of this technique shows how this sped-up the diversification of the mining area, producing significant differences on the HHI with the counterfactual synthetic unit and indicating that the level of concentration of the economic activity is significantly lower than it would be if the mining activity had prolonged over time.

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