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An OECD working paper measures contributions of regions to aggregate growth

In line with the research-results disseminated on the occasion of the RURBAN conference, the OECD published a collectively authored working paper on the contributions of regions to aggregate growth in the OECD.

Authors recall that while national growth rates have converged in the period 1995-2009, there is an increasing disparity in GDP per capita between regions. Researchers decided to calculate the contribution of different types of regions to aggregate growth and to investigate the impact of agglomeration forces and convergence forces which are influencing growth in different types of regions.

They find out that a few large regions contribute disproportionately to total growth while many small regions provide marginal contributions (less than 0.7% each). However, because they are more numerous, the cumulated growth from these small regions outweighs the contribution of the large ones. Put in figures, 2.4% of regions (20) contribute to 27% of OECD countries aggregated growth while remaining 97.6% contribute 73% of aggregated growth.

In order to Compare predominantly urban and predominantly rural regions, the OECD distributed the regions in four groups depending on their initial level of GDP/capita and annual average growth rates:

1- rich regions growing above OECD average,

2- rich regions growing below OECD average,

3- less-developed regions growing above OECD average

4- less-developed regions growing below OECD average

From the graph, you can clearly see that “while many urban regions grew faster than rural ones, many rural regions also out-performed urban regions in terms of GDP per capita growth rates over the period’.

The paper concludes that opportunities for growth may exist in all regions. They also find out that the larger concentration of above average regional growth rates is concentrated in middle-sized regions.

The message sent to policy-makers is that while they should ensure that the few regions with largest contributions to growth remain competitive, ‘improving the performance of periphery and even lagging regions should not be neglected because their cumulated contribution is dominant’.

A scientific confirmation of article 174 of the EU treaty on territorial cohesion and a plea for place-based territorial development policies.

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26 March 2014

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