1.
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

2.
The OECD
productivity puzzle
is to some extent a
regional issue

3.
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

4.
Convergence of countries vs.
divergence of regions in the OECD
GDP per capita dispersion
is now greater within
countries than between
countries

5.
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 urbanfrontier
regionscontain very large cities
75% of divergingmostly urban
regionscontain very large cities
TL2 regions, 2000-2013

6.
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).

7.
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

8.
Proximity to cities benefits surrounding
rural & intermediate regions
8

9.
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

10.
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
%

11.
How Policies can
promote regional
catching-up?

12.
• 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

13.
• 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

14.
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

15.
Administrative fragmentation lowers city
productivity
15 15
Source: Ahrend et al. OECD RDWP, 2014

16.
Administrative fragmentation is also
associated with higher segregation of people
16
Hypothesis: Fragmented metropolitan governance can facilitate
segregation at the level of local units.
-.050.05.1.15
Inequalitybetweenlocaljurisdictions,(Componentplusresidual)
0 .2 .4 .6 .8 1
Administrative 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)

17.
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.

18.
The role of subnational governments
needs to be more widely recognised
18

19.
Towards a better governance of
regional, rural and urban policies
Reported lead ministries or entities across three policy fields
19

20.
THANK YOU!

21.
Annexes

22.
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

23.
• 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

24.
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)