PROMOTING GROWTH IN ALL REGIONS

Transcription

1 PROMOTING GROWTH IN ALL REGIONS Meeting National Growth Goals William Tompson Regional Development Policy Division Public Governance and Territorial Development Directorate OECD-konference om regionale vækststrategier Billund, 5 September 2012

2 Regional contributions to aggregate growth are highly concentrated A few big regional hubs are main drivers of growth but most growth occurs outside the hubs The notion of an average region is meaningless Contributions to OECD-wide growth, TL2 regions 2

3 Agglomeration tends to be associated with and higher value added, productivity and employment Higher GDP per capita Higher Productivity Higher Employment 3

4 But not necessarily faster growth Only 45% of metro--regions grow faster than the national average. Metro-regions appear to have entered in a process of convergence II Atlanta San Francisco Washington I Initial GDP per worker in PPP III Detroit San Diego Phoenix Osaka Berlin Prague Dublin Monterrey Busan Budapest Ankara Istanbul Deagu Naples Izmir Puebla Krakow -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Warsaw IV Average annual growth rates in GDP per capita

5 There is no unique path to growth A large number of urban regions grow faster than the average rural region and many rural regions grow faster than the urban average. Opportunities for growth exist in all types of regions. Rural not synonymous with decline. 5

6 What does this mean for policy? Policy makers are right to be concerned about the performance of the big regional hubs that are their main drivers of growth. An exclusive focus on the hubs neglects the potential impact on growth of policies that helped the great mass of regions to improve their performance. Analysis of the determinants of growth at regional level suggests that the constraints on growth that confront the leading regions are different from those confronting the rest. This points to the need for differentiated place-based approaches. There is low-hanging fruit in the fat tail. Although the big drivers of growth are mainly large urban areas, as one would expect, there are many big urban regions that make little or no contribution to aggregate growth. 6

7 Regional growth: an overview of model results (1) First key finding: the key growth drivers are endogenous to the region. Skills appear to be critical for all types of regions. The proportion of the workforce with low skills appears to have a greater impact on growth than the share with tertiary qualifications. This implies a critical role for regional level action: labour markets for low- to medium-skill activities are smaller, and the low-skilled tend to be less mobile. Mixed results concerning transport infrastructure raise questions about the prominence of such investments in many regional strategies. Where infrastructure deficits do need to be addressed, it is important to tackle them in conjunction with other policies, so as to ensure that its potential benefits are realised. Innovation, as measured by technology-based variables, has the strongest correlation with growth: The greater the level of GDP per capita in the given country, the more it matters.. Among regions with higher than national average GDP per capita, those that are growing above average have much higher values on innovation variables than those that are growing below average. 7

8 Regional growth: an overview of model results (2) Second key finding: policy complementarities are critical. The analysis points to the potential drawbacks of isolated interventions and unbalanced policy packages. Improving regional performance requires a feasible strategy for addressing a number of policy challenges in a co-ordinated fashion. Such an approach should make it easier to balance different welfare goals. Economic policies Efficiency Equity Environmental sustainability Economic reforms may increase Green growth may improve Sustained growth equity sustainability Social policies Social policies may increase efficiency (knowledge, trust, security) Social cohesion Environmentally sustainable social policies Environmental policies Green economy may boost innovation Social policies can enhance inclusiveness; the poor are most hurt by environmental degradation Sustainable environment 8

9 Regional growth: an overview of model results (3) Third key finding: the relative weight of different factors depends in part on the relative level of development of the region. This points to the need for place-based approaches. In general, the importance of innovation rises as regions approach the productivity frontier. Fourth key finding: The need for a place-based approach may be greatest in low-density regions. 9

10 To sum up OECD analysis points to a few broad lessons for policy design: Provide infrastructure as part of an integrated regional approach. Invest in human capital. Emphasise innovation and R&D. Focus on integrated regional policies. External finance (e.g. EC funds) works best as part of a well designed local strategy for endogenous growth. 10

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