Many governments are searching for new ways to unlock the growth potential of their economies. This has focused attention on why some cities and regions grow faster than others, and what public policies can do to maximise the performance of all types of regions, for the benefit of national economies.
Acronyms and abbreviations
Regional growth patterns are not geographically uniform. Indeed, economic activity tends to concentrate in large metropolitan cities. Often, these cities are considered as the engines of national growth. There is a general lack of understanding of the growth potential that can exist in regions outside of main cities and its relevance for aggregate performance.
Regional growth trends
This chapter categorises OECD regions in different ways to understand the rate at which they are growing and what factors are behind these growth trends. There is strong potential for growth in rural and intermediate regions, particularly in regions with levels of GDP per capita below the national average. Less developed regions contributed to almost half of the OECD’s aggregate growth (43%) between 1995 and 2007. Moreover, in ten OECD countries (Austria, Belgium, Czech Republic, France, Norway, Portugal, the Slovak Republic, Sweden, United Kingdom and the United States) these regions have contributed more to national growth than those countries’ advanced regions. These results reveal the importance of catching-up regions for aggregate performance and suggest that policies targeting these types of regions need not merely be social; rather they should be well designed economic policies in line with the new regional paradigm.
What are the key growth factors? The theory
This chapter investigates how less-developed regions can catch up to national average GDP per capita. It focuses on identifying and analysing the main factors responsible for growth - and the main bottlenecks - for regions at different levels of development. It bases the analysis on five factors for growth: infrastructure, human capital, labour market, innovation, agglomeration and connectivity, and productivity. A first key finding of this analysis is that growth tends to follow simultaneous gains in several areas, such as human capital, infrastructure and innovation, rather than just one of these factors being responsible. This emphasises the importance of a multidimensional policy approach and the benefits of enhancing areas of complementarity, rather than tackling individual sectors in isolation. A second key message is that human capital is very important for boosting regional growth in all types of regions. And finally, growth dynamics vary with levels of development; they are not the same for underdeveloped regions as for advanced regions.
Growth factors and bottlenecks
To increase our understanding of factors for growth and the bottlenecks hindering regional growth, this chapter supplements the theory of Chapters 1 and 2 with information from 23 OECD case studies. The case study regions are divided into two groups: i) dynamic regions which over the last 12 years have caught up with the national average GDP per capita; and ii) less dynamic regions which have not yet caught up with the national average in GDP per capita. Each case study presents a snapshot of the region, an economic assessment, the key elements responsible for growth and the key bottlenecks. At the end of the chapter the main findings drawn from the 23 case studies are summarised. One of the key findings is the importance of an integrated policy approach to avoid the unintended consequences of isolated actions, which can trigger brain drain and other damaging phenomena. The research suggests some policy packages that should be implemented together, depending on the developmental stage of the region in question: i) regional growth policies, plus policies for building infrastructure and human capital; ii) strengthening infrastructure connectivity while creating a favourable business environment; and iii) strengthening institutions (e.g. good governance and leadership capacity) while promoting innovation.
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