Presentation on Regional Development Policy in OECD countries, evidence and policy, made at the launch of the Regional Development Program of the University of Southern Denmark. Presentation by Paulo Veneri, Territorial Analysis and Statistics, OECD Centre for Entrepreneurship, SMEs, Local Development and Tourism. More information: http://www.oecd.org/cfe/regional-policy/

1. REGIONAL DEVELOPMENT IN
OECD COUNTRIES: EVIDENCE
AND POLICY
Paolo Veneri
Regional Development Policy Division
Centre for Entrepreneurship, SMEs, Local Development and Tourism
paolo.veneri@oecd.org
Kolding, 9 November 2017

2. Outline
1. Trends and challenges in regional development
2. What is driving regional catching up?
3. Objectives of the regional development policy and
paradigm shift
4. Policy and governance trends: rural, urban and
regional development policy

3. TRENDS AND CHALLENGES IN
REGIONAL DEVELOPMENT
a) Stagnant productivity growth
b)Within country polarization

4. Convergence across countries, divergence
across regions, metro areas and people
GDP per capita
dispersion across
regions within
countries is now
greater than across
countries
GDP per capita
dispersion across
metropolitan areas
within countries is
greater than across
countries
Income inequality across
people is also on the rise
Source: Bartolini, D., H. Blöchliger and S. Stossberg (2016) “Fiscal
Decentralisation and Regional Disparities”, Economics
DepartmentWorking Paper. http://dx.doi.org/10.1787/888933411619
Source: Calculations based on OECD Regional Statistics (database)
“Metropolitan areas” http://dx.doi.org/10.1787/888933411622

5. Long-term decline in productivity
growth rates: not just the crisis
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
In 2007, several US sectors were
displaying poor productivity
performance, eg. Construction -12%
Recent aggregate trends of labour productivity growth, 1997-2014

6. Productivity gaps between frontier firms
and other firms are widening
Source: Andrews, Criscuolo and Gal (2015).
Labour productivity; index 2001 = 0

7. Productivity gaps between frontier firms
and other firms are widening
Source: Andrews, Criscuolo and Gal (2015).
Labour productivity; index 2001 = 0

8. Future of productivity:
The problem is diffusion

9. Productivity growth of “frontier” regions
outpaces that of most regions
Notes: Average of top 10% and bottom 75%/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.
http://dx.doi.org/10.1787/888933411648
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
60% increase in
the gap from
1995-2013

10. One in four persons in the OECD lives
in regions that are falling further behind
Note: Countries excluded due to lack of data or an insufficient number of regions include: Chile, Estonia, Iceland, Israel, Japan,
Luxembourg, Mexico, Norway, Switzerland and Turkey. Numbers in parenthesis indicate the number of TL2 regions in the
country.
http://dx.doi.org/10.1787/888933411795

11. Regional disparities in multi-dimensional
living standards higher than income alone

12. WHAT IS DRIVING CATCHING UP?

13. The tradable sector appears to make the
difference: due to “unconditional” convergence?
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
%
At TL2, services and
resource
extraction/utilities
At TL3,
manufacturing
shows large
difference

14. Other usual factors seem much less
discriminant for regional catching-up
Source: Calculations based on OECD Regional Statistics (database) http://dx.doi.org/10.1787/888933411736

15. Gross value added growth in the EU comes from
tradable services (growth) and non-tradables (size)
15
Low-income regions Low-growth regionsOther EU regions
-30
-20
-10
0
10
20
30
40
50
60
70
80
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
Tradable
services
Manufacturing Agriculture Non-tradable
services
%%
-30
-20
-10
0
10
20
30
40
50
60
70
80
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
Tradable
services
Manufacturing Agriculture Non-tradable
services
%%
-30
-20
-10
0
10
20
30
40
50
60
70
80
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
Tradable
services
Manufacturing Agriculture Non-tradable
services
%%

16. OBJECTIVES OF THE REGIONAL
DEVELOPMENT POLICY AND
PARADIGM SHIFT

17. Objectives of regional development
policy in OECD countries
Source: OECD (2010), Regional development Policies in OECD countries, OECD Publishing, Paris.

18. Paradigm shift in regional development
policy in OECD countries

19. POLICY AND GOVERNANCE
TRENDS: REGIONAL, URBAN AND
RURAL DEVELOPMENT POLICY

20. How can we reap greater benefits for
regions given these facts?
• 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

21. • Questionnaire to countries asking about priorities,
strategies and policy instruments
• One response per country collected from member
country representatives to the following bodies
– Regional Development Policy Committee
– Working Party on Urban Policy
– Working Party on Rural Policy
– Working Party on Territorial Indicators
• Goal was to get a basic overview of country
approaches
– additional verification of country responses would be
required for country-specific analyses
OECD Regional Outlook Survey

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. Frameworks for regional development
Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.

24. 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.

25. 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.

26. Within OECD, EU countries more clearly tracking
spending and ensuring monitoring/evaluation
Source: OECD (2016), OECD Regional Outlook 2016: Productive Regions for Inclusive Societies.

27. How does the organisation of these
policies at national level matter?
Source: OECD
(2016), OECD
Regional Outlook
2016: Productive
Regions for Inclusive
Societies.

28. • 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

29. Thank you!
For info: paolo.veneri@oecd.org