The phasing-out of lignite-based electricity production will affect the economic development of small regions in Germany. The political induced phasing-out of an important economic sector provokes the resistance from regional actors and state administrations. Using the example of the Lusatia region, the research project considers the following question: How can a proactive approach towards structural change be implemented in a structurally weak region?

Of particular importance in this context is a structural policy that creates a framework for mobilising endogenous potentials. It is established that locally well adapted regional innovation systems stimulate and accelerate innovative actions. Such innovation systems consist of private and public actors, organisations and lastly formal and informal institutions. They coordinate the actions of the participants and create level playing field.

Within the project, the chair of macroeconomics and the chair of microeconomics will develop a suitable governance structure for managing the structural change in Lusatia. Based on extensive literature studies we will provide a critical review of the current state of knowledge about the political economy of structural change and international best practices.

Starting from there, we develop a political economy model that integrates insights from behavioural economics. The ideal governance structure activates the previously identified region-specific economic innovation potentials and promotes smart specialisation in Lusatia.

In addition to the economic potential, a governance structure must strengthen the perceived legitimacy of structural policy arrangements. The main focus will be on stakeholders’ incentives – governments on all levels, regional pressure groups and the corporate sector – and on the political balance that results from their interaction. The governance of innovation systems directly influences citizens' mindset to structural change. Governance must therefore increase the willingness to cooperate.

We will apply our theoretical results and insights to the specific case of Lusatia. We will develop concrete and viable policy advice for structural economic change in Lusatia, and engage in an exchange with the affected regional stakeholders.

Financed by: Bundesministerium für Bildung und Forschung
Duration: 2019 - 2022
Project partners: BTU Cottbus-Senftenberg; Institut für Ökologische Wirtschaftsforschung Berlin; Leibniz-Institut für Wirtschaftsforschung Halle; Innovationsregion Lausitz; TU Dresden