Shrinking Smartly in Estonia

Preparing Regions for Demographic Change

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Many lower density regions in the OECD face shrinkage, with projections suggesting that half of Europe will need to manage decline in remote regions by 2050. Half of Estonia’s counties experienced population decline greater than 25% since 1991. Shrinkage leads to problems including lower municipal revenues, ageing, and greater per capita costs of service and infrastructure provision. Estonia is also the most carbon-intensive economy in the OECD, and heavily utilises its forests and land. To tackle these challenges, the report provides analyses in a number of policy areas to respond to demographic change in a smart and sustainable manner. A policy framework that emphasises a spatially oriented, coordinated approach for responding to shrinkage is developed. The report provides policy recommendations to make land use more efficient and spatial planning more coherent. It suggests ways to improve the transfer system and strengthen the municipal revenue base while encouraging inter-municipal cooperation. It also discusses education, the municipalities’ largest spending responsibility, providing recommendations that adapt the school network to shrinkage while ensuring access to high-quality education for all students.


Financing local public services and infrastructure in Estonia: Challenges and ways forward

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.


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