Table of Contents

  • This report offers guidance on how to improve the design and delivery of development programmes for regions and cities. Building on frontier economic theory and country experiences, it identifies how supra-national, national and subnational governments can provide better incentives to achieve effective results.

  • To face complex challenges such as globalisation, climate change, or disruptive technologies, policy makers need to rethink the design of regional development policies. More efficient regional development policies require a management architecture that combines different results-oriented instruments which facilitate managing the different trade-offs faced by policy-makers: how to ensure that regional development policy instruments are sufficiently flexible while also ensuring policy stability and accountability? How to strike a balance between performance, compliance and administrative costs? To manage these trades-offs and to develop innovative policy approaches, it is necessary to combine recent developments in economic theory with practical country experiences.

  • This chapter summarises cross cutting lessons on how to improve the design and implementation of regional development policy discussed during a series of 2017 seminars organised by the OECD and the European Commission. It highlights the main seminar lessons, bringing together frontier economic theory and country practices regarding performance frameworks, financial instruments, policy conditionalities, contractual arrangements and behavioural insights in regional policy. Nine lessons are derived from the latest theoretical developments and practical examples to design and use regional development policy instruments more effectively. It highlights pitfalls that policy-makers should avoid and proposes potential practical solutions to improve the management of economic development programmes.

  • This chapter discusses the use of financial instruments to support socially desirable investments by private and public actors in order to promote economic development in cities and regions. While theoretical arguments for the use of financial instruments are generally well defined, revisiting theory can help bridging gaps of their practical use. This chapter thus explores, from a theoretical and practical perspective, advantages and disadvantages of financial instruments, and how to promote their use in more effective ways. It identifies factors that make their use particularly effective when compared to grants and highlights, at the same time, circumstances under which they are less appropriate. Finally, it summarises practical considerations for policy makers to make the most of financial instruments.

  • In times of fiscal constraint and uncertainty, governments need to balance long-term regional development policies seeking to provide certainty for the public and private sector, with the need to adapt these policies to new priorities and innovation. This chapter explores how contracts can be more flexible across levels of government to respond to these challenges, while not compromising stability. It revises the rationale behind the use of contracts for regional development and looks into new insights from contract theory. After assessing how countries are using contracts, the chapter provides some key lessons from frontier thinking and practical experience for policy makers to design more effective contractual arrangements.

  • This chapter provides theoretical insights for the use of conditionalities in regional development policies. It examines different perspectives from academic literature, including from Game Theory, Public Choice, and Neo-institutional Economics Perspectives, among others. The chapter explores when it is most useful to use conditionalities to support public investment and how different theoretical approaches can help policy-makers better use them. It provides lessons from theory and practice for designing conditionalities for regional policy. It highlights a series of critical factors that are crucial for their effectiveness in triggering regional policy reforms and changes, regardless of conditionalities applied. These range from a need to be context specific, to the fundamental importance of ownership.

  • While there is broad consensus that public investment policies should focus on performance, policy makers face a number of practical challenges when designing performance systems. This chapter addresses some of the key questions that policy makers are seeking to address, including, how can they measure and monitor performance, how to design incentives to ameliorate performance and how performance information can inform budgetary discussions. For this, the chapter explores recent advances in theoretical analysis as well as practical approaches to performance and incentives. This includes a focus on the behavioural aspects of incentives and how to balance the desire for innovation, performance, and compliance, while keeping administrative costs and regulatory burdens manageable.

  • This chapter explores how behavioural insights can be used to improve the effectiveness and efficiency of regional development policies, programmes, and practices. Behavioural insights are applied by governments to gain better evidence on how human beings actually behave, with the aim to make public policies work better. A number of underlying factors have behavioural drivers challenge the effectiveness of regional policies, including the time horizon, political dynamics, and rent seeking, among others. After exploring new frontier thinking on how to apply behavioural science to organisational behaviour, this chapter offers lessons to consider when applying behavioural insights in regional development policy. These may help to improve strategy and decision making, management, and implementation of policies and programmes.