Presentation by Alexander LEMBCKE, Economist, Centre for Entrepreneurship, SMEs, Regions and Cities, OECD at the OECD session on "Regional productivity catching up: the role of EU cohesion policy and the OECD perspective", 3 June 2018, Trento, Italy More information https://oe.cd/festival

1. REGIONAL PRODUCTIVITY
CATCHING UP: THE ROLE
OF THE EU COHESION
POLICIES AND THE OECD
PERSPECTIVE
Trento Festival of Economics
03 June 2018
Alexander C. Lembcke
OECD Centre for Entrepreneurship, SMEs, Regions and Cities

2. Convergence in
per capita GDP
and labour
productivity in the
OECD/EU
Frontier regions
• most productive
regions accounting
for 10% of total
employment
Catching up/Diverging
• Productivity growth
is 5% higher/lower
than in the frontier
over a 13 year
period
2
Source:OECD(2018)ProductivityandJobsinaGlobalisedWorld:(How)CanAllRegionsBenefit?
Productivity gaps have
narrowed in the EU and
the OECD since 2000

3. 3
But gaps within some
countries are widening
Source:OECD(2018)ProductivityandJobsinaGlobalisedWorld:(How)CanAllRegionsBenefit?
Countries follow two
growth models
Distributed growth model:
Catching up supports
productivity growth
• AUT, CZE, DEU, ESP,
ITA, POL, PRT, ROU
Concentrated
growth model:
The “frontier”
dominates growth
• BGR, DNK, FIN,
FRA, GBR, GRC,
HUN, NLD, SVK,
SWE

4. • Well-functioning cities
– Home to knowledge-intensive (traded) sectors
– Larger markets can support economic diversity and
dynamism
– Agglomeration economies (beyond borders) through
urban-rural linkages
• Tradable sectors (that could be traded)
– Face competition even if they are not traded
– Might overcome market size and institutional constraints
– Avoid economic imbalances from excessive expansion of
non-tradables
What supports catching up?
4

5. Regions with strong pre-crisis increases
in non-tradable sectors lost more jobs
5
Calculations based on 208 OECD TL2 regions. Those regions with the largest
shifts towards non-tradable sectors suffered higher employment losses, on
average, following the 2007-08 crisis.
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
Less than 2.5
percentage points
increase
2.5 to 5 percentage
points
5 to 7.5 percentage
points
More than 7.5
percentage points
increase
Change in the share of non-tradable employment, 2000-07
Employment growth (%), 2008-14
Source:OECD(2018)ProductivityandJobsinaGlobalisedWorld:
(How)CanAllRegionsBenefit?

6. • Reigniting (public)
investment
• Structural reforms
(accompanied by
complementary
policies at the local
level)
• Multi-level
governance and
territorial reforms
6
Broad policy responses
Investment (GFCF in 2005 EUR) in 2014 higher than in 2007-08
Investment set back by 7 years
8 - 12 years
13 - 16 years
17 - 19 years
20 or more years
Source:OECD(2018)ProductivityandJobsinaGlobalisedWorld:(How)CanAllRegionsBenefit?

7. • Strategically diversifying regional economies
– Specialised regions more productive, diversified ones grow faster
– Manufacturing important, but tradable services are gaining
• Identifying and building on local strengths
– Linking investment in skills, FDI, and knowledge from the
supply chain
– Taking advantage of opportunities for territorial branding
• Integration across actors and policies
– Skills development for place-based needs is a shared
responsibility
– But skills policies might not be enough: trade shocks vs
automation
Strategies to promote catching up and
employment growth
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8. • Policies that aim to ensure equal treatment in all
regions can have dissimilar effects in different places
– Rules that govern the dismissal of workers or the licensing
of new firms, active labour market policies that provide
training in case of dismissal, etc.
– Can also apply to minimum wages and wage setting
through centralised wage bargaining
• =>Risk that regional inequalities become entrenched
• A place-based approach to policy allows for
“geographically differentiated” interventions
– and should be part of a wider regional development
strategy
8
Place-based policies:
One-size doesn’t fit all

9. OECD (2018)
Productivity and Jobs in a Globalised World:
(How) Can All Regions Benefit
http://www.oecd.org/publications/productivity-
and-jobs-in-a-globalised-world-9789264293137-
en.htm
OECD (2016)
OECD Regional Outlook 2016:
Productive Regions for Inclusive Societies
http://www.oecd.org/regional/oecd-regional-
outlook-2016-9789264260245-en.htm
Thank you
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