What is regional development policy for and how does it work? 4th International Conference on Overcoming Regional Disparities “Implementing Regional Development Policies: What are the key factors for success?” Chişinǎu, 22 May 2014 William Tompson Head of the Urban Development Programme Public Governance and Territorial Development Directorate OECD
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William Tompson - What is regional development about and when does it work?
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What is regional development policy for and how does it work?
4th International Conference on Overcoming Regional Disparities “Implementing Regional Development Policies: What are the key factors for success?”Chişinǎu, 22 May 2014
William TompsonHead of the Urban Development ProgrammePublic Governance and Territorial Development Directorate OECD
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What is the problem?
Wide variation in growth performance before the crisis
Convergence vs Agglomeration
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What is the problem?
Tends to concentrate at all scales
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Source: Calculations based on the OECD Regional Database..
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What is the problem?
Concentration is increasing over time
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95_98 98_01 01_04 04_07
Source: Calculations based on the OECD Regional Database..
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What is the problem?
In most economies, a few big hubs account for a large share of aggregate growth. This implies:• Policy makers are right to be concerned about the
performance of the big regional hubs that are their main drivers of growth.
• Most growth still occurs outside the hubs. An exclusive focus on the hubs neglects the potential of policies that can help the great mass of regions.
• The notion of an “average region” is effectively meaningless, statistically and in policy terms.
What this means for policy
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What is the problem?
Overall, the crisis contributed to rising disparities across the OECD
Differential impact of the crisis
obs 2007-2010 2007-2008 2008-2009 2009-2010
urban (PU) 307 -0.67% -0.21% -3.91% 2.41%
intermediate 386 -0.86% 0.11% -3.75% 1.53%
PRC 301 -0.44% 0.84% -3.88% 2.09%
PRR 199 -1.22% -0.57% -4.30% 1.69%
GDP growth (2007-2010)
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What is the problem?
Labour mobility – constrained in many places – did not alter the picture much in the short term.
• This is where much stakeholder engagement occurs: information revelation and balancing top-down leadership and bottom-up initiative.
Designing regional development strategies
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The solution
It’s not all about cohesion investments and shiny new infrastructure projects. Good regional development policy is nothing more nor less than good economic policy, without recourse to macroeconomic policy instruments. So think about:• Entrepreneurship, entry, regulation and competition.• Education, training and skills.• Innovation.• Active labour-market policies.
Don’t neglect the boring bits
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The pitfalls
• Too many goals dispersion of effort.
• Focus on current service delivery rather than development.
• Too much localism (often linked to the above!).
• Compensatory logic (often contributes to dispersion).
• Too little variety: often the result of following the (actual or perceived) priorities of the national government or donor.
• Too little risk.
• Failure to think seriously about spillovers.
Regional policy for national performance
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Why policy co-ordination?
Isolated sectoral actions have unintended outcomes.
Persistence of inequality
Infrastructure provision
Leaking by linking
Policyresponses
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Why policy co-ordination?
Isolated sectoral actions have unintended outcomes.
with labour mobility
Persistence of inequality
Policyresponses
Human capital formation
Brain drain
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Towards an integrated approach
Infrastructure provision
Human capital formation
Businessenvironment
Innovation
Regional growth and convergence
at the regional scale
Many countries are reforming in this direction, but implementation is still difficult.
Policyresponses
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Paradigm shift in regional policy
The “old new” OECD Paradigm: still a challengeTraditional
Regional Policies New Paradigm
ObjectivesBalancing economic performances by
temporary compensating for disparities
Tapping under-utilised regional potential for competitiveness
Strategies Sectoral approach Integrated development projects
Tools Subsidies and state aid Soft and hard infrastructures
Actors Central government Different levels of government
Unit of analysis Administrative regions Functional regions
Redistribution from leading to lagging regions
Building competitive regions by bringing together actors and targeting key local assets
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A word about structural funds
• Don’t focus on absorption capacity to the exclusion of all else.
• Money matters but sometimes less is more – harder choices can make for better decisions.
• Impact is greatest when investments take place in the context of a well-developed, cross-sectoral strategy.
• Provision of local amenities is nice – but it’s not a motor for development.
An instrument, not a substitute for policy
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A word about structural funds
Good practice doesn’t look like this…
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A word about structural funds
…Or this
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To sum up
• Provide infrastructure as part of an integrated regional approach.
• Invest in human capital.
• Emphasise innovation and R&D.
• Work at a scale and with a vision that makes sense for growth.
• Focus on integrated regional policies.
• Treat structural funds as a policy tool within an overall strategy – not as a policy in and of themselves.
OECD analysis points to a few broad lessons for policy: