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Regions Matter

Economic Recovery, Innovation and Sustainable Growth

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Why do some regions grow faster than others, and in ways that do not always conform to economic theory? This is a central issue in today’s economic climate, when policy makers are looking for ways to stimulate new and sustainable growth. OECD work suggests that there is no one-size-fits-all answer to regional growth policy. Rather, regions grow in very varied ways and the simple concentration of resources in a place is not sufficient for long-term growth. This report draws on OECD analysis of regional data (including where growth happens, country-by-country), policy reviews and case studies. It argues that it is how investments are made, regional assets used and synergies exploited that can make the difference. Public investment should prioritise longer-term impacts on productivity growth and combine measures in an integrated way. This suggests an important role for regional policies in shaping growth and economic recovery policies, but also challenges policy makers to implement policy reforms.

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Policy Implementation and Governance

This chapter discusses the various approaches that national and sub-national governments have adopted to improve co-ordination among levels of government for supplying services and infrastructure tailored to the specific needs and opportunities of sub-national territories. The impact of economic downturn on sub-national governments and the national stimulus packages reflect an accurate illustration of this topic. The crisis is having a large negative impact on most sub-national governments’ finances due a “scissor” effect: tax revenues falling sharply as a consequence of the fall in activity, while welfare expenditure soars. Regional authorities may consequently decide to reduce their investment spending. In order to avoid such a pro-cyclical behaviour, most national stimulus plans have a regional public investment support dimension. For this to be successfully implemented, effective co-ordination between levels of government is necessary. This chapter first examines the basic institutional and financial elements of sub-national authorities’ mandates and resources. It then focuses on the use of specific instruments for co-ordination and capacity building in regional policy: contracts, collaboration between municipalities and the use of performance indicators.

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