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OECD Regional Outlook 2016 and related research


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Presentation of OECD Regional Outlook 2016 and related research made at the Seminar on "Innovations and challenges in the management of a regional policy, held in Bratislava, Slovak Republic, 22 February 2017. Presentation by Joaquim Oliveira Martins, Regional Development Policy Division, OECD.
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OECD Regional Outlook 2016 and related research

  1. 1. OECD REGIONAL OUTLOOK 2016 AND RELATED RESEARCH Joaquim Oliveira Martins Regional Development Policy Division, OECD Seminar: "Inovácie a výzvy v manažmente regionálneho rozvoja“ 22 February 2017 Bratislava, Slovak Republic
  2. 2. OECD regional development policy paradigm Compensating lagging regions does not work: • Creates dependency, not development • Richer regions may become reluctant to support lagging regions OECD promotes ‘place-based’ policies focusing on: • Use of regional specific assets (or create absolute advantages to stimulate competition & experimentation across regions) • Create complementarities among sectoral policies at the regional (or local) level • Use of multi-level governance mechanisms for aligning objectives & implementation
  3. 3. The ultimate goal: ensuring well-being across regions in the Slovak Republic Source: OECD Regional Well-Being Database: Note: Relative ranking of the regions with the best and worst outcomes in the 11 well-being dimensions, with respect to all 395 OECD regions. The eleven dimensions are ordered by decreasing regional disparities in the country. Each well-being dimension is measured by the indicators in the table below.
  4. 4. National productivity performance needs the contribution of all regions
  5. 5. Labour productivity growth has trended downwards – even before the crisis OECD Productivity database; moving averages (t, t-1, t-2) Source: OECD (2016) OECD Regional Outlook 2016: Productive regions for inclusive societies, -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 In 2007, several US sectors were displaying poor productivity performance, eg. Construction -12% 5
  6. 6. Convergence of countries vs. divergence of regions in the OECD GDP per capita dispersion is now greater within countries than between countries
  7. 7. 7 Persistent territorial inequalities Gini index of inequality of GDP per capita across TL3 regions, 2000 and 2013 OECD Regions at a Glance 2016 Regional variation in GDP per capita (as a % of national average), 2013 (TL2) OECD Regions at a Glance 2016
  8. 8. 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
  9. 9. What are 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 urbanfrontier regionscontain very large cities 75% of divergingmostly urban regionscontain very large cities TL2 regions, 2000-2013
  10. 10. 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).
  11. 11. How does national labour productivity growth depend on the performance of regions? Annual average growth in real per worker GDP between 2000-2013 (or closest year available). Overall national growth, driven by frontier but other regions not catching up
  12. 12. Contribution to national labour productivity growth, 2000-12 12 Productivity and “catching up” dynamics: Slovak Republic Percentage contribution to national GDP growth, 2000-2012 Note: Difference between national labour productivity growth as calculated with and without the indicated region. Note: The contribution is the product of a region’s GDP growth rate by its initial share of GDP.
  13. 13. What are the main drivers of regional productivity catching-up?
  14. 14. Proximity to cities benefits surrounding rural & intermediate regions 14
  15. 15. Productivity trends by type of region 15 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
  16. 16. Labour productivity of remote rural areas has recently declined 88% 89% 90% 91% 92% 93% 94% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total RURAL RURAL CLOSE TO CITIES RURAL REMOTE Productivity levels of Predominantly Urban regions = 100
  17. 17. 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 Diverging Tradable GVA share Tradable employment share 2013 2000 %
  18. 18. -0.5 0 0.5 1 1.5 2 2.5 Low-income and low-growth regions Other regions Frontier Catching up Keeping pace Diverging % Sectoral and regional contributions to productivity growth 2000-13 Employment shifts to faster growing sectors Employment shifts to initially more productive sectors Sectoral productivity growth Productivity growth 18 Productivity growth mainly by increased productivity within sectors; sectoral changes noted in catching-up regions 1. Employment shifts towards sectors with high productivity levels 3. Sector becomes more productive 2. Employment shifts from faster growing to slower growing sectors
  19. 19. Structural change can create productivity growth, but the transition can be costly Productivity and employment growth in Norte (Portugal), 2000-13 Bubble size indicates percentage contribution to total GVA -177 000 jobs +20 000 jobs
  20. 20. Regional Policies and Governance
  21. 21. How can we reap greater benefits for regions given the Outlook findings? • Focus on productivity drivers and growth in all regions through strategic investments – And avoid stifling the performance of the leading region • Consider how cites are linked together in a “system of cities” within a country – And how cities are linked with their hinterland • For rural areas, upgrade the approach to a “Rural Policy 3.0” – Consider non-farm rural development, local capacity
  22. 22. What are countries stating as objectives? Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies. • Critical role of subnational governance capacity perhaps under- represented relative to its importance for regional development
  23. 23. What tools are reported to meet regional development policy objectives?
  24. 24. Frameworks for regional development Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.
  25. 25. National urban policies: most changes in this area (as compared to rural and regional) • From social challenges to improving economic spillovers? • Metropolitan governance appears to be under-estimated relative to its importance for economic, social and environmental impact Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.
  26. 26. EU countries typically base their rural strategies on the EU Rural Development Programme Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.
  27. 27. Within OECD, EU countries more clearly tracking spending and ensuring monitoring/evaluation Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.
  28. 28. How does the organisation of these policies at national level matter? Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.
  29. 29. • Economy-wide structural reforms help regional catching up, more so if complemented by regional development policies – Product market regulations – Labour market regulations • Multi-level governance and territorial reforms: the “how” matters for place-based policies – Administrative fragmentation of local jurisdictions associated with • productivity penalty • greater segregation by income in metro areas Other strategies to achieve a double dividend of productivity and inclusion
  30. 30. • Regional productivity catching-up contributes significantly to national productivity growth • It requires mobilisation of specific regional assets and an appropriate governance model across levels of government • Thus, the decentralisation and regional governance agenda is a productivity & growth agenda for the whole country Bottom-line
  31. 31. THANK YOU!