Rebalancing and regional economic performance: Northern Ireland in a Nordic Mirror

Northern Ireland has been characterized as having an excessively large public sector. This characteristic has led some to explain poor regional economic performance in terms of "crowding out". This diagnosis has been used to justify a policy of "rebalancing" and the region copying its southern neighbour's lower rate of Corporation Tax. The experience of large public sectors in 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 sector rather than its cause. In terms of the possible "economic dividend" from devolution we suggest a Hayekian insight is better: no "silver bullets" exist.