Regions matter: economic recovery, innovation and sustainable growth

Innovation Regional planning Regional economics

The point of departure for the report is the issue of how to generate growth in regions. In particular, why do some regions grow faster than others, often in ways that confound economic theory? This is a central issue at a moment when policy makers are looking for ways to stimulate new and sustainable growth, post-economic crisis. OECD work suggests that simple concentration of resources in a place is not a sufficient condition for sustained growth. The key appears to be how assets are used, how different actors interact and how synergies are exploited. Evidence of this is provided by analysis of the factors that drive growth: for example, infrastructure investment is effective when combined with other forms of investment, notably in education and skills. For innovation, it is not simply the number of researchers or the level of R&D investment that count, but how the innovation system as a whole functions. This leads to very different policy considerations from those that derive from the assumption that concentration alone will automatically generate economies of agglomeration. It also suggests a role for public policy in ensuring that growth is maximised from the assets present in a region. The market does not achieve this alone.

This new perception of the role of regional policy is particularly relevant post-crisis at a time when issues such as green growth and eco-innovation are high on the agenda. Regional policies have a strong contribution to make to sustainable growth at the regional and national levels. But in order to maximise this contribution, public policy needs to embrace reform and continue a transition away from market-distorting subsidies to policies that unlock the potential of regions and that support long-term economic, social and environmental objectives. This is all the more crucial given the very limited resources that are available to national, regional and local governments and the tight fiscal constraints likely over the coming years.

The research for this publication was presented to the 2009 OECD Ministerial “Investing for Growth: Building Innovative Regions” responsible for regional policy held at the OECD on 31 March 2009.

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