"Employing exogenous variations linked to geological characteristics of coal mining and the temporal emergence of shale innovation,

this study investigates the effects of coal production on the fiscal landscape of local government units within the United States.

The findings reveal that the declines in coal output reduce local public revenue streams,

primarily attributable to the contraction of 1) own-source revenues encompassing local rents, taxes, and charges, alongside

2) intergovernmental (IG) transfers. Notably, the decline in IG transfers is predominantly steered by diminished state-allocated general-purpose aids,

implying that income shocks induced by local coal industry contraction tend to curtail state-to-local fiscal disbursements.

In response, local administrations cut expenditures both in targeted public services with specific objectives (e.g., housing development) and general undertakings (e.g., local workforce training).

Neighboring jurisdictions encounter economic and fiscal spillover effects within the same state stemming from the downturn in coal production.

The consideration of an alternative fiscal equalization mechanism underscores the imperative of equitable intergovernmental fund transfers to invigorate communities reliant on exhaustible resources, particularly those susceptible to the energy transition."