Table of Contents

  • Many lower density areas in the OECD face declining and ageing populations. By 2050, projections suggest that half of Europe’s economies will need to manage decline in their remote regions. Estonia has been severely affected by this phenomenon, with its population shrinking by 15% since 1991, and declines of more than 25% in half of its counties. This raises a number of challenges, including housing vacancies and deteriorating built environments, lower municipal revenues and greater per capita costs of providing services such as education, health and infrastructure, especially in relation to higher shares of the elderly population.

  • Estonia's population – 1.33 million inhabitants in 2020 – has shrunk by 15% since 1991 and all available projections indicate that this trend will continue. But shrinkage has been uneven. While larger urban areas have grown, more than half of Estonia’s counties experienced population decline greater than 25%. Rural and remote areas have been hardest hit. Shrinkage results in lower density, which increases per head service and infrastructure provision costs. It also results in housing vacancies and deteriorating built environments, problems that require additional municipal resources to maintain suitable living conditions in the face of declining tax revenues. Another effect is a higher share of the elderly population in all regions of Estonia. These older residents require additional services and care, compared to the average citizen.

  • Estonia’s population of 1.33 million inhabitants in 2020 has shrunk by 15% since 1991. Available national and European projections suggest that this trend will continue. Depopulation has not happened evenly. While the larger functional urban areas (FUAs) of Tallinn and Tartu grew, rural and remote urban areas have been rapidly shrinking. Shrinkage results in lower density, which increases per head service and infrastructure provision costs. It also results in housing vacancies and deteriorating built environments, problems that require additional municipal resources in the face of declining tax revenues. Shrinkage also leads to a higher share of the elderly population requiring additional services and care. Adding to difficulties is the fact that Estonia has the most carbon-intensive economy in the OECD, together with heavily utilised forests and steadily increasing built-up areas, indicative of inefficient spatial development.

  • This chapter sets the scene of this report by assessing the current demographic challenges Estonia is facing and presenting key facts relevant to the spatial interventions needed to address them. Specifically, it gives an overview of policy responses aimed at addressing shrinkage, stressing a generalisation approach that combines growth and shrinkage strategies based on spatial interventions in key policy areas. It then presents data on demographic trends and projections, together with data on digital connectivity. Finally, it concludes with an assessment of the governance structure of Estonia and an overview of the structure of the report.

  • This chapter analyses the patterns of land use and the spatial planning framework of Estonia, identifying trends relevant to assessing the country’ response to shrinkage. It also presents data supporting the argument for efficient land use and the curbing of sparse, outward development from an environmental and fiscal perspective. Finally, the chapter offers a range of policy responses aimed at addressing depopulation and shrinkage, with a focus on strengthening and streamlining the spatial planning framework at the regional level and better equipping local plans to deal with future demographic challenges.

  • Estonia’s population is projected to decline by 2040 in all but two counties. While the whole country will lose about 2% of its population by 2040, most regions will lose more than 20% of their population. A shrinking and ageing population will change the demographic composition of municipalities, erode local tax bases and alter the demand for local public services. Based on research literature and international practices, this chapter analyses the Estonian multi-level governance model, municipal spending assignments and revenue sources. The chapter makes several recommendations on inter-municipal co-operation, the transfer system and central-local relationships.

  • Education is the most important service provided by municipalities, comprising half of the expenditures. This chapter discusses the current and future provision of education in Estonia in face of shrinkage, as an example of service network reform. After describing the main features, reforms and trends of the school system, this chapter evaluates whether actual differences in school sizes, resources and expenditure across municipalities align with differences explained by geographic and demographic characteristics. The chapter then offers insights into future policy scenarios of school network adaptation and discusses opportunities and challenges of digital education in rural areas. Finally, the chapter offers a series of recommendations to prepare the education sector for shrinkage, along with policy insights for other service areas stemming from the analyses.