Soft Budget Constraints and Regional Industrial Policy: Reinterpreting the Rise and fall of De Lorean

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Abstract


The rise and fall of De Lorean Motor Cars Limited (DMCL) has been traditionally interpreted as either the result either of John De Lorean’s psychological flaws or as confirming the supposed limitations of activist industrial policy. However, when the episode is examined in greater historical detail, neither of these interpretations are compelling. The reinterpretation outlined here draws on institutional analysis as well as a range of archival sources, much of it previously unreleased. The inefficiencies within the original contractual agreement are highlighted. The lack of credibility associated with this agreement was in turn traceable to the institutional environment (with its associated risk-reward implications) under which industrial policy operated. This environment had a political element - it had been distorted by the Troubles and the resulting fears policymakers had of a cumulative causation relationship between violence and unemployment. Officials in Belfast, against Treasury opposition, advocated state-led entrepreneurship as a policy response.
Original languageEnglish
Pages (from-to)1497-1515
Number of pages19
JournalCambridge Journal of Economics
Volume40
Issue number6
Early online date27 Dec 2015
DOIs
Publication statusPublished - Nov 2016

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