1. Regional Development Policy Division, OECD
REGIONAL DEVELOPMENT POLICY edinburgh, scotland, united kingdom 23 january 2018
Chris McDonald
Regional Development Policy Division, OECD

2. OECD regional development policy paradigm
Compensating lagging regions does not work:
Creates dependency, not development
Wealthier regions may become reluctant to support lagging regions
OECD promotes ‘place-based’ policies focusing on:
Use of regional specific assets (or create absolute advantages to stimulate competition & experimentation across regions)
Create complementarities among sector policies at the regional (or local) level
Use of multi-level governance mechanisms for aligning objectives & implementation
Sweden’s overall regional development objective is to simultaneously ensure equity and territorial growth, and it has rigorously adhered to this commitment.
It is currently facing territorial challenges such as demographic change (ageing, internal migration, asylum seekers); the question of “rural” and a sense that rural areas are being “left behind”; regional and municipal governance and the adequacy of current structures.

3. 18/11/2018
National productivity performance needs the contribution of all regions

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

5. The productivity gap between frontier and lagging regions has increased
Averages of top 10% (frontier), bottom 75%, and bottom 10% (lagging) regional GDP per worker, TL2 regions
60% increase
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.

6. Productivity and catch up trends amongst UK regions
Labour productivity growth, by region, United Kingdom*
Source: OECD (2016) OECD Regional Outlook
*Average annual labour productivity (GDP per worker) growth rate [diamonds] and deviation from
the growth rate of the country’s productivity frontier [bars],

7. UK region’s contributions to labour productivity growth vs
UK region’s contributions to labour productivity growth vs. national growth
Contribution to labour productivity growth,
Percentage contribution to national GDP growth,
Source: OECD (2016) OECD Regional Outlook
Source: OECD (2016) OECD Regional Outlook
Note: 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.
Note: Percentage contribution shows the share of total GDP growth that was due to growth in the indicated region. Total contribution sums to 100%.

8. Local productivity trends: Scotland, UK
Labour productivity, sub-regional (TL3), Scotland, UK ( )
Scotland
GVA per worker
Average annual growth
GVA per worker (2004)
Source: OECD Regional Database

9. What are the main drivers of regional productivity catching-up?
18/11/2018
What are the main drivers of regional productivity catching-up?

10. Growth factors vary according to level of development
Growth drivers/bottlenecks
Lagging (>75% of national average per capita GDP)
Intermediate (75-100% of national average per capita GDP)
Leading (>100% of national average per capita GDP)
Human capital/skills: presence of very low skilled √√ √
Human capital/skills: presence of highly skilled
Labour-force mobilisation: participation/employment rates
Innovation activity: patents, R&D spending, employment in knowledge-intensive sectors
√√√
Agglomeration effects: density of population, density of GDP
Quality of government
Source: OECD (2012) Promoting Growth in All Regions

11. All tradable sectors, TL2 regions
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 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).

12. Administrative fragmentation is correlated with lower city productivity

13. What are the key drivers of rural productivity growth?
Tradable activities are key for rural close to cities and remote rural
Proximity to cities - a minimum level of density is key for economies of scale/scope and delivery of goods and services.

14. Policy implications for rural areas
Identifying drivers in rural areas
Tradables (manufacturing), renewable energy, natural resources, services, fisheries, forestry, agriculture, tourism, natural amenities
Finding the niche (smart specialisation)
How to add value in these domains
Policy focus on enabling factors: skills, accessibility, market intelligence, institutions, innovation
Urban – rural linkages
Infrastructure and connectivity
Shared governance and policies
Demographic trends and forward looking policies
Address long term cost enhancing efficiency in service provision (planning, ICT)
Mitigation and adaptation to climate change

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Conclusion

16. Bottom-line
Regional and rural development policies are important for national productivity growth
Policies should enable the use of specific regional assets, create complementarities across sectoral policies, and make use of multi-level governance mechanisms
They have to be properly integrated in the structural policy package for inclusive growth

17. Thank you! http://www.oecd.org/cfe/regional-policy/ Introduction
3 main points could be discussed: (1) Rationale for the Principles; (2) The Principles: consultation procedure and TDPC Ministerial meeting; (3) Next steps: implementing and monitoring the Recommendation