OECD REGIONAL OUTLOOK 2016
PRODUCTIVE REGIONS FOR INCLUSIVE
SOCIETIES
EUROPEAN WEEK OF REGIONS AND CITIES
BRUSSELS, 10-13 OCT 2016
Joaquim Oliveira Martins Regional Development Policy Division, OECD
The OECD productivity puzzle is to some extent a
regional issue
A growing productivity gap between the frontier and other regions
Notes: Average of top 10% and bottom 10% TL2 regions, selected for each year. Top and bottom regions are the aggregation of regions with the highest and lowest GDP per worker and representing 10% of national employment. 19 countries with data included.
Averages of top 10%
(frontier), bottom
75%, and bottom
10% (lagging) regional GDP per worker,
TL2 regions
50 000
60 000
70 000
80 000
90 000
100 000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
USD PPP per employee
Frontier regions Lagging regions 75% of regions
1.6% per year
1.3% per year
1.3% per year
Convergence of countries vs. divergence of regions in the OECD
GDP per capita dispersion is now greater within
countries than between countries
Where are located the Frontier, Catching-up and Diverging regions?
0
10
20
30
40
50
60
70
80
Mostly Urban (127) Intermediate (62) Mostly Rural (100)
%Frontier (41) Catching-up (65) Keeping pace (107) Diverging (76)
70% of mostly urban frontier regions contain very large cities
75% of diverging mostly urban regions contain very large cities
TL2 regions, 2000-2013
Contribution of the different regional productivity patterns to OECD growth
Type of regions
Employment
share in 2000
GDP share in
2000
Annual avg. GDP growth,
2000-13
GDP growth contribution
Frontier 16.1% 20.1% 1.7% 21.9%
Catching up 20.3% 18.2% 2.2% 25.3%
Keeping pace 38.9% 39.1% 1.3% 30.4%
Diverging 24.6% 22.6% 1.6% 22.4% OECD average 1.6% Note: Frontier regions are fixed for the 2000-13 period. In four countries the values for 2000 or 2013 were extrapolated from growth rates over a shorter time period as data for 2000 or 2013 were not available. The countries are FIN (2000-12), HUN (2000-12), NLD (2001-13) and KOR (2004-13).
How national labour productivity growth depends on the performance of regions?
Annual average growth in real per worker GDP between 2000-2013 (or closest year available).
Regional catching-up can play an important role for national
productivity growth
Proximity to cities benefits surrounding rural & intermediate regions
8
Productivity trends by type of region
9
Rural remote regions present a higher variation in productivity growth rates than other types of regions
Annual average labour productivity
growth, 2000-12 Standard deviation Coefficient of
variation
Predominantly urban 1.01% 1.02% 1.019
Intermediate 1.07% 1.09% 1.024
Predominantly rural close to
cities 1.36% 1.32%
0.972
Predominantly rural remote 0.70% 1.15% 1.641
Note: Labour productivity is defined as real GDP per employee. GDP is measured at PPP constant 2010 US Dollars, using SNA2008 classification; employment is measured at place of work. The coefficient of variation represents the ratio of the standard deviation over the mean.
Source: OECD Regional Outlook 2016
Catching-up regions are characterised by a stronger intensity of the tradable sectors
All tradable sectors, TL2 regions
Notes: Tradable sectors are defined by a selection of the 10 industries defined in the SNA 2008. They include: agriculture (A), industry (BCDE), information and communication (J), financial and insurance activities (K), and other services (R to U). Non tradable sectors are composed of construction, distributive trade, repairs, transport, accommodation, food services activities (GHI), real estate activities (L), business services (MN), and public administration (OPQ).
20
25
30
35
40
45
50
Frontier Catching-up Diverging Frontier Catching-up DivergingTradable GVA share Tradable employment share
2013 2000%
How Policies can promote regional
catching-up?
• Economy-wide structural reforms help regional catching-up
• Well-designed and well-implemented public investments (OECD Governance of Public Investment Toolkit)
• Multi-level governance and territorial reforms
Broad policy responses
• Regional policy should focus on growth, productivity and well-being, not compensation
• Governance of metropolitan areas enhance the effect of labour market, product market and innovation policies
• Increase integration between transport, spatial planning, and housing policies
• Rural policies still remain sectoral (e.g. agriculture); the focus should be on the economics of low-density areas and rural-urban linkages
The design of regional & urban policies
An opportunity: a growing focus on metropolitan governance across the OECD
14
Average number of metropolitan governance bodies created or reformed in OECD countries per decade
0
5
10
15
20
25
30
35
40
45
50
1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 2001-2010
Administrative fragmentation lowers city productivity
15 15 Source: Ahrend et al. OECD RDWP, 2014
Administrative fragmentation is also associated with higher segregation of people
16
Hypothesis: Fragmented metropolitan governance can facilitate segregation at the level of local units.
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0 .2 .4 .6 .8 1Administrative fragmentation
Controlling for country fixed effects and other city characteristics (i.e. income , population, spatial structure), higher administrative fragmentation is associated to higher spatial segregation by income in different municipalities (cf. Brezzi, Boulant & Veneri, 2016)
Four main models to govern Rural-Urban partnerships
Explicit rurban partnerships
• Rennes (France) • Geelong (Australia) • Nuremberg (Germany) • Central Zone of West Pomeranian
Voivodeship (Poland • BrabantStad (Netherlands)
Implicit rurban partnerships
• Forlì-Cesena (Italy) • Extremadura (Spain) • Castelo Branco (Portugal) • Central Finland (Jyväskylä and
Saarijärvi-Viitasaari) (Finland) • Lexington (United States) • Prague/Central Bohemia
(Czech Republic)
Model 1 Model 2 Model 3 Model 4
Delegated functions No delegated functions Delegated functions No delegated functions
• Rennes (France) • Geelong (Australia) • Nuremberg
(Germany) • Central Zone of West
Pomerania Voivodeship (Poland)
• BrabantStad (Netherlands)
• Extremadura (Spain)
• Forlì-Cesena (Italy)
• Lexington (United States)
• Prague (Czech Republic)
• Central Finland (Jyväskylä and Saarijärvi-Viitasaari) (Finland)
• Castelo Branco (Portugal)
17 OECD (2013), Rural-Urban Partnerships: An Integrated Approach to Economic Development, OECD Publishing.
The role of subnational governments needs to be more widely recognised
18
Towards a better governance of regional, rural and urban policies
Reported lead ministries or entities across three policy fields
19
THANK YOU!
Annexes
The OECD productivity puzzle (Aggregate GDP per worker growth in %, 1997-2014)
Source: OECD Productivity database; moving averages (t, t-1, t-2)
-1
-0.5
0
0.5
1
1.5
2
2.5
3
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
%
Japan United States Euro area (19 countries)
Financial crisis
• Invest using an integrated strategy tailored to different places • Adopt effective co-ordination instruments across levels of
government • Co-ordinate across SNGs to invest at the relevant scale
Pillar 1 Co-ordinate across governments and
policy areas
• Assess upfront long term impacts and risks • Encourage stakeholder involvement throughout investment cycle • Mobilise private actors and financing institutions • Reinforce the expertise of public officials & institutions • Focus on results and promote learning
Pillar 2 Strengthen capacities
and promote policy learning across levels of
government
• Develop a fiscal framework adapted to the objectives pursued • Require sound, transparent financial management • Promote transparency and strategic use of procurement • Strive for quality and consistency in regulatory systems across
levels of government
Pillar 3 Ensure sound framework conditions at all levels of
government
The OECD Recommendation on the Governance of Public Investment across levels of government
23
The need for more flexible land use planning
• Planning is too slow to respond to changing economic, demographic and social conditions
• Planning can be an answer to market-failures, but may also prevent efficient market solutions from emerging
• Restrictive land use regulations prevent densification
• Single-use zoning makes mixed-use developments impossible
• Planning can serve as a barrier-to-entry and restrict competition
Source: The Governance of Land use, OECD (forthcoming)