05/12/2011 - Huge regional variations in economic and social conditions within a country require a rethink of the way governments design policies to boost growth and jobs, says a new OECD report.
The economic crisis has hit some areas far harder than others. The OECD’s first Regional Outlook calls on policy makers to pay greater attention to regional factors such as amenities, accessibility, size, infrastructure and demographics, as well as industry specialisations and networks. The report focuses on the need for good governance and coordination of policy around these regional factors and rejects the idea that governments should rely on budget transfers to reallocate resources between rich and poor regions.
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Tailoring action to local conditions is becoming increasingly important, not least because labour mobility within many countries has been held back by the real-estate crisis and a rise in the number of households facing negative housing equity.
Unemployment and job creation vary greatly between regions. In a number of OECD countries, more than half of net job losses recorded between 2007 and 2010 were concentrated in a single region. In some regions of Spain, people are six times more likely to be jobless than in others. And in the Slovak Republic, Italy and Belgium, long-term unemployment in the worst-affected regions is four times the national average.
Longer-term trends such as ageing and migration also affect regions in very different ways. Areas with ageing populations face particular pressures on the provision of social services. Others have benefitted economically by establishing a trend of attracting highly-skilled workers. These trends affect mobility and skill concentration and can only be managed with targeted regional policy actions.
The Regional Outlook observes that policy-makers have traditionally looked to major cities to spur economic dynamism. But on average 70% of the economic growth of OECD countries occurs outside the big metropolitan hubs. And although predominantly rural regions can be among the slowest-growing regions in the OECD, they are also over-represented among the most dynamic. Contrary to popular belief, “rural” is by no means synonymous with economic decline, the report says.
The report stresses that national fiscal consolidation plans and financial stability require the credible involvement of sub-national governments. Yet many local and regional governments are under increasing fiscal strain, and financial markets are increasingly differentiating between the credit-worthiness of regions within countries, in much the same way as they distinguish countries within the euro area. Innovative policy is needed to make the most of scarce resources at all levels of government. With local and regional government accounting for two-thirds of total public investment in OECD countries, their capacity to manage such investment in the most efficient, growth-enhancing way is critical.
To obtain a copy of the Regional Outlook 2011, journalists are invited to contact the OECD’s Media Division (tel.: 33 1 45 24 97 00 or e-mail: email@example.com)
For further information about OECD work on regional policy, please contact Joaquim Oliveira Martins (tel.: +33 1 45 24 88 53, e-mail: firstname.lastname@example.org) or Suzanne Leprince (tel.: +33 1 45 24 81 72, email@example.com).
More information is also available at www.oecd.org/regional/outlook.