Presentation made at the European Week of Regions and Cities, on 10 october 2017 in Brussels, Belgium. Presentation byJoaquim Oliveira Martins, OECD Centre for Entrepreneurship, SMEs, Local Development and Tourism. For more information: http://www.oecd.org/cfe/regional-policy/

1. THE CONTRIBUTION OF
REGIONAL POLICY TO
INCLUSIVE GROWTH
EUROPEAN WEEK REGIONS & CITIES, BRUSSELS 10 OCT 2017
Joaquim Oliveira Martins, Special Advisor
OECD Centre for Entrepreneurship, SMEs, Local
Development and Tourism (CFE)

2. The OECD Inclusive
Growth Initiative: a
response to
productivity slowdown
and rising inequalities

3. 3
Productivity growth has slowed even
prior to the crisis
-2
-1
0
1
2
3
4
5
6
7
8
1995-2013 2001-07 2007-13
GDP per hour worked, total economy, percentage change at annual rate

4. 4
Income inequality has been on the
rise over the last 30 years
Gini coefficients of income inequality, mid-1980s (early 1990s for EMEs) and
2013, or latest available year

5. Why is a place-based
approach so important
for promoting inclusive
growth?

6. Regional productivity has diverged
in the OECD, slowing since the crisis
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.
Source: OECD Regional Outlook 2016
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
60% increase

7. Only around 20% of OECD metro areas
have grown inclusively
7
Change in GDP pc and in Gini coefficient of household disposable income, 2000-13
Source: OECD (2016), Making Cities Work for All, OECD Publishing, Paris.

8. Are regions catching up to
the productivity leaders in
their country? Or are they
falling further behind?

9. Geography of
productivity
convergence
relative to
national
frontiers in
European
regions,
2000-14

10. Region’s contributions to national
labour productivity growth 2000-2014
The contribution of a region is defined as the difference between the national annual average
labour productivity growth rate and the same rate excluding the indicated region, cf. OECD
Regional Outlook (2016).
GERMANY (TYPE I) FRANCE (TYPE II)

11. Region’s contributions to national
labour productivity growth 2000-2014
The contribution of a region is defined as the difference between the national annual average
labour productivity growth rate and the same rate excluding the indicated region, cf. OECD
Regional Outlook (2016).
UK (TYPE II)SPAIN (TYPE I)

12. Productivity trends for Type I (catching
up) and Type II (frontier) countries
Type I countries Type II countries
 There was productivity convergence for Type I countries
 Type II countries displayed productivity divergence
55 000
65 000
75 000
85 000
95 000
105 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Frontier Top 10% Lagging Bottom 90%
in USD
1% per year
1.1% per year
55 000
65 000
75 000
85 000
95 000
105 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Frontier Top 10% Lagging Bottom 90%
in USD
1.6% per year
0.9% per year

13. How can regional and
urban policies better
contribute to inclusive
growth?

14. Regional Policies should promote
rural-urban linkages
14
Source: OECD Regional Outlook 2016
Average annual labor productivity growth rate 2000-12 (%)

15. Tradable sectors are important for
regional productivity catching-up
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 Catchin
Tradable GVA share Tradable emplo
2013 2000
%
er Catching-up Diverging Frontier Catching-up Diverging
Tradable GVA share Tradable employment share
2013 2000

16. Globalisation shocks and regional
inequalities are related
Source: OECD Economic Outlook, 2016

17. 17
An example of a large structural
adjustment: Region Norte (Portugal)
2000-07 2008-13
+64 000 jobs
-98 000 jobs
-9 000 jobs
-67 000 jobs
-101 000 jobs
Non-tradable sectors
contributed to GVA
growth through
employment growth,
tradable sectors by
productivity growth
+12 000 jobs

18. Better metro governance improve
productivity and reduce inequalities
18
-.05
0
.05
.1
.15
0 .2 .4 .6 .8 1
Administrative fragmentation
Higher administrative
fragmentation reduces city
productivity premia
Higher administrative
fragmentation increases
municipal inequality and
segregation

19. Key issues
 There may be some trade-off between aggregate
productivity performance and regional inequalities.
Regional policies should help transform these
trade-offs into synergies (or complementarities),
i.e. contribute to inclusive growth
 Regional policy favouring the productivity
catching-up of lagging regions acts as an important
driver of a country-wide growth strategy
 Strong territorial asymmetries may signal that a
growth potential exists at the regional level that
could be further mobilised.

20.  The administrative burden in many programmes
remains high
 We often under-estimate the importance of building
relationships (and trust) across levels of government
 We continue to expect results when organisational
and individual incentives are aligned to the contrary
 We create systems to promote performance but in
the end we promote compliance
Governance lessons for the redesign
of regional policies
Source: Proceedings of EC/OECD Governance seminars (forthcoming)

21. Thank you!