Foreword 5
Acknowledgements 7
Table of contents 9
Reader’s Guide 16
Definitions and typologies 16
ISO country codes 17
Disclaimers 17
Acronyms and abbreviations 17
Executive Summary 21
Key findings 21
Key recommendations 22
Part I. The place­based dimension of productivity and inclusion 25
Chapter 1. Regional productivity gaps and their consequences 27
Key Messages 28
Introduction 28
The role for regions and place­based policies in boosting aggregate productivity 29
The productivity gap between frontier firms and the rest has widened 29
Figure 1.1. Labour productivity growth trending downward even before the crisis 30
Figure 1.2. Productivity gaps between frontier firms and other firms are widening 30
Box 1.1. The global innovation “diffusion machine” for productivity 31
Stylised depiction of aggregate productivity growth 31
Figure 1.3. Country convergence has been accompanied by divergence of regions within countries 32
Figure 1.4. As metro areas across countries converged, metro areas within countries diverged 33
Figure 1.5. Income inequality increased in most OECD countries, but the crisis halted the trend in some countries 34
The regional “catching­up machine” needs to be fixed 33
Figure 1.6. Productivity growth of frontier regions in a country outpaces that of most other regions 35
Box 1.2. Defining the productivity frontier 35
A region’s productivity growth does not automatically benefit from strong frontier performance 36
Box 1.3. How to measure regional catching up 37
Schematic representation of regional catching­up dynamics 37
Box 1.3. How to measure regional catching up (cont.) 38
Figure 1.7. Patterns of catching up and divergence differ across countries 38
Figure 1.8. The top 50 OECD regions for productivity growth tend to be in countries with a strong frontier 40
Figure 1.9. The frontier does not necessarily stimulate catching­up dynamics in all regions 41
Box 1.4. Catching up regions: Examples from Poland and Spain 42
Box 1.4. Catching up regions: Examples from Poland and Spain (cont.) 43
Castile­La Mancha has one of the fastest growing knowledge­intensive service sectors in Europe 43
Box 1.5. ICT: Spillovers across sectors to boost productivity 44
Drivers of growth and catching up are different in urban and rural areas 44
Figure 1.10. Frontier regions tend to be urban, but catching-up regions tend to be rural or intermediate 45
Table 1.1. Stylised models of urban and rural economies 47
A prominent tradable sector is a common characteristic of both urban and rural catching­up regions 47
Box 1.6. Convergence and the tradable sector 48
Figure 1.11. The tradable sector plays a critical role in regional productivity trends 49
Figure 1.12. Tradable services and resource extraction contribute to catching up 50
Figure 1.13. Manufacturing also observed to promote catching up, but at a smaller regional scale 51
Figure 1.14. Other growth­related factors do not differ between catching­up and diverging regions 52
Figure 1.15. Regions with high levels of productivity are also regions that are better governed 53
Figure 1.16. Catching­up regions for productivity also experienced modest improvements in governance quality 54
Countries display different patterns of catching­up dynamics 54
Figure 1.17. Regions in both fast and slow growing countries can catch up (or fall behind) their frontier 55
Box 1.7. The contribution of regions to GDP and labour productivity growth 56
Figure 1.18. Frontier regions in the Netherlands experience both high and low rates of productivity growth 57
Figure 1.19. Hamburg and Hesse attract employment, but struggle to utilise it productively 57
Figure 1.20. One in four OECD residents lives in a region that is falling behind the frontier 58
Interregional differences in innovation­related factors have nevertheless narrowed in many countries and for several indicators 59
Figure 1.21. Innovation­related activities and productivity trends: United States 59
Figure 1.22. Interregional gaps in innovation­related performance show mixed results, often narrowing 61
Figure 1.23. Regional concentration of innovation­related resources within countries generally declining 61
From productivity to inclusion and well­being in regions and cities 62
Well­being differences across regions have both increased and decreased depending on the dimension 62
Figure 1.24. The degree of interregional variation depends on the well­being dimension 63
Figure 1.25. Well­being indicators and productivity performance 64
Figure 1.26. Gaps between the top and bottom performing regions in many well­being dimensions generally narrowed 66
Figure 1.27. Regional disparities in multidimensional living standards are higher than for income alone 67
Cities face particular challenges for inclusion across income levels and populations, such as immigrants 67
Figure 1.28. The degree of metropolitan area income inequality can vary a lot in some countries 68
Figure 1.29. Average household income varies significantly across jurisdictions in a metropolitan area 69
Figure 1.30. Many small­ and medium­sized cities have a significant share of foreign­born residents 70
Public action to promote catching up and inclusion: structural reforms, public investment (including through place­based policies) and governance reforms 71
Economy­wide structural reforms help regional catching up, more so if complemented by regional development policies 71
Well­designed and well­implemented public investments also support regional catching up 72
Figure 1.31. Trends of weakened public and private investment may undermine productivity goals 73
Figure 1.32. Public investment as a share of government expenditure on a downward trend over the last 20 years 73
Box 1.8. Results of the OECD­COR 2015 survey on public investment of subnational governments 74
Sectors subject to investment cuts in the last five years 75
Multi­level governance and territorial reforms can unlock productivity potential and support inclusion 75
Conclusion 76
Notes 77
Bibliography 78
Annex 1.A.1 83
Table 1.A1.1. Categorisation of OECD regions by within­country catching­up dynamics 83
Figure 1.A1.1. Labour productivity is mostly positively associated with economic aspects of well­being 90
Figure 1.A1.2. The relationship between labour productivity and well­being is often complex 91
Chapter 2. Regional development: Policies to promote catching up 93
Key Messages 94
Introduction 94
Priorities for regional, urban and rural development policies: Cross­country trends 95
Regional development approaches focused on growth 95
Figure 2.1. Regional development policy: Countries rating objectives as high priority 95
Box 2.1. Proactive Structural Change programme in Finland 96
Box 2.2. EU Cohesion Policy and Rural Development: Changes for 2014­20 97
Urban policy objectives are typically related to transport, spatial planning and social inclusion 99
Figure 2.2. Urban development policy: Countries rating objectives as high priority 99
Rural policies are still mainly sectoral, but moving towards cross­sectoral approaches 100
Figure 2.3. Rural development policy: Countries rating objectives as high priority 100
Box 2.3. Switzerland’s New Regional Policy: Focusing on regional competitiveness 101
Countries have set out these objectives in multiple national strategies 102
Figure 2.4. Overarching frameworks for regional, urban and rural development 103
Box 2.4. Habitat III: Towards a global standard for national urban policy frameworks 104
Regional policy tools mainly split between business development and infrastructure 106
Figure 2.5. Use of policy tools in regional development policy 106
Table 2.1. Policies to promote innovation outside of leading regions 107
Box 2.5. Cluster mapping portals: New tools to understand regional economies 107
Table 2.2. Special economic zones: OECD country examples 110
Governance strategies to promote catching­up dynamics and inclusion 110
Figure 2.6. Higher income countries tend to rely more on subnational governments for spending 111
The entity responsible for regional, urban and rural development portfolios frames policy approach 111
Figure 2.7. Regional, rural and urban development ministries/entities at national level 112
Figure 2.8. Country practices in monitoring, evaluation and tracking of spending 113
Figure 2.9. Place­based initiatives in the United Kingdom over the last 40 years, 1975­2015 114
Box 2.6. Evaluations of place­based policies: Lessons from two studies 115
Box 2.7. Tennessee Valley Authority: Evaluating the impact of 100 years of place­based policies 115
National networks of regional development agencies: One governance tool 116
Figure 2.10. Choices for central government action: Regional development agencies and alternatives 117
Figure 2.11. Canada’s federal approach to regional economic development: From centralised to decentralised with RDAs 118
Box 2.8. From regional to local: England, United Kingdom 119
Reforming regional governance to boost capacity and deliver on regional development objectives 119
Table 2.3. Examples of OECD country regional reforms 120
Figure 2.12. Population and surface area of regions in the OECD, 2014 121
Figure 2.13. Regional government budget expenditure as a percentage of GDP, 2012 122
Conclusion 123
Notes 124
Bibliography 124
Annex 2.A.1 127
Table 2.A1.1. Regional development strategies and recent changes: OECD country overview 127
Table 2.A1.2. Urban development strategies and recent changes: OECD country overview 132
Table 2.A1.3. Rural development strategies and recent changes: OECD country overview 136
Part II. Special focus: Rural areas – Places of opportunity 139
Chapter 3. Understanding rural economies 141
Key messages 142
Introduction 142
Rural areas as places of opportunity 143
Defining rural regions 145
Figure 3.1. Rural­urban functional linkages involve many types of interconnections 146
Figure 3.2. A continuum from more to less densely populated areas 147
Figure 3.3. Different types of rural 148
Table 3.1. Challenges by type of rural region 148
The OECD regional typology 151
Box 3.1. The OECD regional typology and its extension 152
Figure 3.4. One in 4 residents in the OECD lives in a predominantly rural region only 1 in 20 lives in a rural remote region
What are low­density economies? 154
Figure 3.5. Features of low­density economies 155
Figure 3.6. The elderly dependency ratio is similar in urban and rural regions close to cities, 2002­14 157
Figure 3.7. Populations in rural regions tend to be older than in urban regions 158
Figure 3.8. The share of workers with tertiary education is lower in rural regions 159
Trends, opportunities and challenges for rural areas 160
Trends in regional productivity 161
Table 3.2. Trends in GDP, productivity and population 162
Table 3.3. Rural remote regions present a higher variation in productivity growth rates than other types of regions 163
Figure 3.9. Growth in labour productivity is less concentrated in rural remote regions 164
Productivity trends among small (TL3) regions in the OECD 165
Figure 3.10. Many rural regions are among the 10% top performing OECD TL3 regions 165
Figure 3.11. For most regions increases in productivity result in greater employment 167
Among rural regions, the simultaneous increase of productivity and jobs is more frequent in rural regions close to cities 167
Figure 3.12. Positive correlation between GDP per capita growth and employment growth in rural regions 168
What are the key factors driving these trends? 168
Table 3.4. Difference in characteristics between fast and slow growing rural regions, 2004­07 169
Figure 3.13. The tradable sector drives productivity growth 169
Table 3.5. Determinants of productivity growth in rural regions, post­crisis period, 2008­12 170
Figure 3.14. The tradable sector has lost importance since the crisis 171
Conclusion 171
Notes 172
Bibliography 173
Annex 3.A.1. Test of mean difference 174
Table 3.A1.1. Test of mean difference 174
Annex 3.A.2. Change in regional statistics 175
Table 3.A2.1. Sample size, difference between old and new SNA series 175
Table 3.A2.2. Summary statistics, 1993 SNA series 176
Annex 3.A.3. Country Definitions of rural areas 177
Table 3.A3.1. Rural definitions in select OECD countries 177
Chapter 4. Rural Policy 3.0 181
Key messages 182
Introduction 182
The Rural Policy 3.0 183
Box 4.1. The evolution towards the Rural Policy 3.0 183
Table 4.1. Rural Policy 3.0 184
Objectives: Increasing well­being in rural areas 186
Figure 4.1. OECD framework for well­being 187
Competitiveness and productivity 186
Box 4.2. The United Kingdom’s strategy to boost rural productivity 188
Box 4.3. Rural SMEs and innovation in the United States 190
The environment 192
Box 4.4. Making the bioeconomy work for rural development: The Nordic experience 193
Table 4.2. Innovations in renewable energy products, practices and policies in case study regions 194
Box 4.5. Incorporating a well­being framework into policy design, implementation and evaluation 195
Policy focus: Competitive advantages for low­density economies 196
A key strategy for low­density economies is to focus on competitive advantages 196
Realising competitive advantage through “smart specialisation” 197
Box 4.6. Smart specialisation: Policy messages 199
Box 4.7. Rural innovation: The case of Nordland, Norway 200
Tools: Policy complementarities and integrated investments 201
Mutually reinforcing policies generate higher returns 201
Integrated investments and policy complementarities will differ by type of place 202
Table 4.3. Policy complementarities for different types of rural regions 202
Service delivery is an important area for policy complementarity 203
Table 4.4. Factors impacting the cost of rural services 203
Box 4.8. France’s “one­stop­shop” for citizens 205
Box 4.9. Japan’s “small stations” initiative 206
Box 4.10. Sharing best practices for regional service delivery: Massachusetts, United States 208
Key actors and stakeholders: Rural­urban partnerships and multi­level governance 208
Rural governments can work with a much broader range of partners than is common today 209
Table 4.5. Factors that promote and hinder rural­urban partnerships 210
Box 4.11. The European Union’s Integrated Territorial Investments 211
Box 4.12. France’s reciprocity contracts 212
Remote rural regions can benefit from forming rural­rural partnerships 213
Rural governments can partner with “third sector” organisations to improve well­being 213
Public­private partnerships in a rural setting can strengthen both governments and firms 214
Approaches to resolving local problems can require bringing new players to the table 214
Box 4.13. Community driven and collaborative local revitalisation in Ama­cho, Japan 214
Policy approach: Community capacity building 216
Community capacity fosters economic and social resilience 216
Box 4.14. Empowering local government and civil society actors in Québec, Canada 216
Box 4.15. Deployment of fibre optical networks through collaborative approaches 218
Box 4.16. The European Union LEADER Programme 219
Conclusion 221
Notes 221
Bibliography 221
Part III. Regions and cities implementing global agendas: A policy forum 225
Chapter 5. Investing in “voice” to implement global agendas 227
Introduction 228
Table 5.1. Key 2015­16 global declarations 228
Are regions and cities indeed the places where policies and people meet? 229
Figure 5.1. Greater trust in local public services than national government 230
Figure 5.2. Significant interregional gaps within countries in wealth and life expectancy 231
Do regions and cities have the right tools and capacities to localise SDGs and other targets? 232
Subnational governments have a number of roles to play and advantages in doing so 232
Figure 5.3. Subnational role in public finance 233
However, there remain legitimate concerns about the quality and capabilities of all subnational governments 234
How can national and subnational governments work better together, using a more structured engagement with people in the process? 235
Box 5.1. OECD Recommendation on Effective Public Investment across Levels of Government 237
Conclusion 238
Notes 238
Bibliography 239
Chapter 6. A New Urban Agenda for the 21st century: The role of urbanisation in sustainable development 241
Introduction 242
Trends and challenges for sustainable urbanisation 243
Regional trends and challenges in urban development 244
The role of quality urbanisation in achieving sustainable development 245
Wealth creation and urbanisation go together 246
Cities and climate change 247
A New Urban Agenda for the 21st century 248
Conclusion 250
Notes 251
Bibliography 251
Chapter 7. Financing subnational and local governments: The missing link in development finance 253
Introduction 254
A global imbalance between local government revenues and responsibilities is at the core of the deficit in infrastructures 255
Financing the city by the city: Acknowledging the role of local governments to promote development policies 256
Meet the deficit in infrastructures and finance basic services through enabling access to external resources 257
Towards fiscally capable local governments and effective local and regional financial institutions 258
Empower local authorities to play a key role in the transition towards sustainable territories 259
Notes 259
Bibliography 260
Chapter 8. Cities and regions – Connected by water in mutual dependency 261
Introduction 262
Three decades of evolution in water management 262
On water governance 264
On regions and cities 265
Notes 267
Bibliography 267
Chapter 9. United States rural policy: Increasing opportunities and improving the quality of life of rural communities 269
Introduction 270
Box 9.1. USDA Rural Development 271
US place­based strategies 271
White House place­based memorandum 272
Establishment of the White House Rural Council 272
Chair’s statement from the 10th OECD Rural Development Conference 272
Initiatives in rural regions 273
Promise Zones 273
Box 9.2. Promise Zone rural success 274
StrikeForce Initiative 274
Box 9.3. StrikeForce results 274
Partnership for Sustainable Communities 275
Box 9.4. Lake Village: Reusing a historic building to support downtown 275
Local Food, Local Places 275
Box 9.5. USDA and local and regional food systems 276
Community Economic Development 277
Box 9.6. CED accomplishments 277
Strategic Economic and Community Development 277
Box 9.7. Strategic Economic and Community Development – Big Lake Area Sanitary District 278
Investing in Manufacturing Communities Partnerships 278
Table 9.1. Snapshot of USDA­RD investments in manufacturing, FY 2009­15 278
Climate Action Plan and rural America 279
Box 9.8. The lightbulb moment in renewable energy 280
Conclusion 280
Bibliography 280
Chapter 10. Global dimensions of malnutrition: Territorial perspectives on food security and nutrition policies 283
Introduction 284
Spatial inequalities in food security 285
Table 10.1. Spatial inequalities in terms of poverty and food security in selected developing countries 286
Agriculture and rural transformations and territorial development 287
Agricultural transformations and economic diversification 287
Figure 10.1. Average shares of household income, by source and farm size, in selected developing countries 288
Urbanisation and population growth 289
The dietary transition 290
Climate change and the environment 290
Technology transition 291
Territorial approaches in practice 291
The way forward 293
Notes 295
Bibliography 295
Chapter 11. Response to the Paris Climate Accord: Scaling up green projects from a bottom­up perspective 297
The Paris Accord and the 2030 Sustainable Development Goals: What will change? 298
Challenges and opportunities of the green economy 298
R20’s track record and vision 298
Figure 11.1. The first project in Kita, Mali by Akuo Energy with R20 299
Scaling Up – Local to Global Climate Action 298
Climate Finance: A Status Report and Action Plan 299
R20 Action Plan 2016­20 300
Phase I (2011­15): Demonstration projects and project development model 300
Figure 11.2. Project development model 300
Phase II (2016­20): Scaling up phase – Training and accelerated finance 300
R20 financial instruments 301
R20 training and capacity building 301
Summary of R20 Action Plan for 2016­20 301
Figure 11.3. Summary of R20 Action Plan for 2016­20 302
The Cities Climate Finance Leadership Alliance 301
Table 11.1. CCFLA members 302
Scaling up in practice: The Planet Pledge Fund 303
Notes 303