Abstract

By examining how a collection of local economies heavily specialised in mining diversified its economy after the cessation of state subsidies that supported coal extraction, this paper attempts to shed light on the research that links mining activities to regional diversification.The case in point is the mining municipalities in Asturias, an autonomous community in northern Spain, which made up one of the nation's most significant coal basins. Although the mining of coal was one of the key factors influencing the region's economic activity, the mine pits were only dispersed among a small number of municipalities[1-15].The most significant negative repercussions of this strategy, which was first put into place in the Recent research (see Fitjar and Timmermans, 2019) suggests that this change in public mining policy should have resulted in a better diversification of the local economies that had previously specialised in mining operations, but it can be difficult to accurately evaluate this effect. Due to the limited number of geographical units that are directly impacted by the therapy, conventional approaches such as difference-in-differences are not feasible. In order to solve this issue, the Synthetic Control Method (SCM) estimation approach from Abadie and Gardeazabal (2003) is applied in this study. A weighted average of the untreated units (non-mining municipalities) produced by the application of the SCM closely resembles the treated unit over the pre-treatment period. The expected outcomes for this artificial control are then made using the weights determined from the. The counterfactual for the treated unit is this projection. This methodology will be used in conjunction with extensive historical data on local employment that has been categorised by industry and is available for all of the region's towns for the years 1978 to 2018. The Herfindahl-Hirschman Index (HHI), which is the variable of interest, is used to quantify the degree of diversification in each region. The use of this technique demonstrates how this accelerated 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 was in the early 1990s (when public policies of support for coal extraction started to end).