4th NAT Commission Meeting with Conference on ''Innovation and modernisation of the rural economy'', 18-19 June 2015, Gaia, Portugal, presentation on Rural Innovation and Growth by Joaquim Oliveira Martins, Head, Regional Development Policy. www.oecd.org/regional/regional-policy/

1. Rural Innovation & Growth
SEMINÁRIO SOBRE INOVAÇÃO E MODERNIZAÇÃO DA ECONOMIA
RURAL 18 JUNHO 2015, VILA NOVA DE GAIA
Joaquim Oliveira Martins
Regional Development Policy Division, OECD

2. Some good news
• Empirically, metropolitan regions across the OECD do not
tend to grow faster than rural regions.
• Predominantly rural regions recorded the highest per capita
growth rates before the crisis (1995-2007).
• Regions and countries with strong primary sectors have fared
better than most in recent years.
• The primary sector is NOT low-tech.
• The evidence points to the innovation potential of non-
metropolitan regions. Innovation is not just for big cities.
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3. There is no single path to regional growth
Evidence shows that growth may materialise in every
type of region 3

4. Convergence of rural regions
4
But more recent data point out a slowdown or
even a stop in this convergence process

5. Well-being in urban vs. rural areas
5
Note: The average values spanning all nine components of the regional well-being indicators are
displayed across the four quartiles ranked from urban (group 1) to rural (group 4). The results
suggest that the urban dimension is not necessarily associated with higher levels of well-being, as
rural dwellers can count on better environmental conditions and more affordable housing with
performance measures such as access to jobs and income in line with those of cities.

6. • Why is rural innovation so important?
• Why is rural innovation different?
• What can policies do to promote rural
innovation?
• Why is still so difficult to convince
national policy-makers about these
policies?
Four questions

7. • Rural areas depend more heavily on tradable
goods & services, thus innovation (both
creation & absorption) is critical for development
• Compensatory policies often create dependency
• We are talking about an enlarged development
model embodying social (inclusive growth) and
environmental sustainability (green growth) that
can be better constructed at the right scale
Why is rural innovation so important?

8. • Innovation has often a urban bias (needs a new metric &
broader non-tech scope) and do not address the needs
of the poor
• Rural innovation cannot be only addressed by top-down
or sectoral policies (e.g. renewable energy)
• Innovation diffusion may be blocked in rural areas
because of specific bottlenecks (higher cost of capital,
lower skills, higher age)
• Is rural a creative class by necessity or by opportunity?
• Innovation is also about entrepreneurship (Swedish
paradox). Social groups in rural areas can be
entrepreneurial; Social capital can be a specific asset of
rural communities
Why is rural innovation different?

9. • Change the narrative and focus on governance. Rural
policy should be both differentiated (place-based) &
integrated
• Bridge the urban-rural divide
• Use of community initiatives and innovation are often
blocked by regulatory issues. How to address this
tension without the risk of fragmenting of the
regulatory framework?
• We also need a model developing innovation in
governance (creating the environment) and in
government (integrated package of public services)
• Focus on entrepreneurship, support to trial and error
activities and provide business service to rural
enterprises (interactions, self-confidence, knowledge
of markets)
What can policies do to stimulate rural innovation?

10. OECD Key principles for place-based policies
I. Use of regional specific assets and smart
specialisation (or to create absolute
advantages to stimulate competition &
experimentation across regions)
II. Create complementarities among sectoral
policies at the regional (or local) level
III. Use of multi-level governance mechanisms
for aligning objectives & implementation
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11. An Evolving OECD Rural Policy Paradigm
Old
Paradigm
New Rural
Policy
(2006)
Revisited Rural
Policy (2015-16)
Objectives
Equalization. Focus
on farm income
Competitiveness of
rural areas
Wellbeing of rural areas based on the
economic, social and environmental
pillar
Key target
sectors
Sector based
Holistic approach to
include various sectors
of rural economies
Low density economies and
differentiating types of rural areas.
Convergence forces are key and fat tail
effects
Main tools Subsidies Investments
Complementarities . Need for
governance structures to the design of
policies.
Key actors
National
governments,
farmers
Multi-level
governance
Rural-urban partnerships across
levels of government and citizen
participation
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12. The need for an integrated Rural-Urban approach
In OECD countries, on average, almost 80% of rural population live
close to an urban area (2012)
Definition of close to a city: driving time to a city of at least 50,000 of
50% of population in a rural area is less than 60m
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13. Cities benefit growth of surrounding regions
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14. • Yes, rural regions can innovate, but we are still making
the case... There is still a lot of self-justification
• Need to prove that these policies make the difference
for aggregate outcomes (1/3; 2/3 rule)
• Understand incentives connected to policy economy-
wide and place-based policies
• Evidence that growth can happen in all kind of regions,
and rural areas can contribute to aggregate growth
(OECD Promoting Growth in All regions)
• Evidence that Well-Being agenda can only be
addressed in a place-based manner (OECD Regional
Well-Being indicators)
Why is still so difficult to convince national policy-makers
about these policies?
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15. But governments need to change
Ministry
Agency
Deconcentrated
regional body
Ministry
Agency
Deconcentrated
regional body
Ministry
Agency
Deconcentrated
regional body
Ministry
Agency
Deconcentrated
regional body
Traditional governance structures
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16. The reform of Governance systems
• Governments are increasingly aware that many of the challenges they are facing cannot
be solved alone or by a single ministry. A more joined up approach can help build
synergies and increase effectiveness. This is happening in several OECD
governments (e.g., Australia, Canada, to some extent UK, NL, US), which are realizing
that the traditional (static) approach is not sufficiently agile to meet complexity.
• They are building a framework by which many individual pieces can play their role in
meeting policy objectives (need to know what role is and the policy objective) while also
having the flexibility to take approaches appropriate to their sector realities. For
example, the approach of a Ministry responsible for rural matters may be different than
a Ministry for Housing and Urbanism, though they should both work collaboratively to
meet environmental policy objectives.
• This is by no means easy, and there is a spectrum of practice. .. But moving from a
static to a dynamic approach – where agility (the ability to adjust your strategy), a
shared agenda, and resource flexibility ($, people, infrastructure) – makes also easy to
move forward…
• The important piece is to be identifying and implementing mechanisms that begin to
build a culture of trust, cooperation, collaboration and integrity
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17. 17
Obrigado!
Thank you!