Regional Development

How Regions Grow: Trends and Analysis


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Pages: 144



Economists, policy makers and international organisations have often paid less attention to regional than to national growth. Yet regional disparities suggest that economic potential in some regions is not being fully exploited, and that this reduces overall national performance.

Regional economic performance varies considerably among regions as a result of a combination of interconnected factors such as geography, demographics, specialisation, productivity, physical and human capital, infrastructure and the capacity to innovate, just to mention a few.

This heterogeneity leads to marked differences in economic performance among OECD regions. Yet, this analysis shows that there is no single path to attain high and sustained growth rates. On the contrary, high growth rates can be achieved by different types of regions.


One common theory suggested that urban concentration is the predominant factor driving economic growth. Yet, the figure below shows that a significant number of rural regions have out-performed urban regions in terms of GDP per capita growth over the past decade.




This report explores what generates growth at the regional level. Do regions only need to improve innovation capacity or do they also need to attract skilled people, upgrade infrastructure, and offer adequate labour markets and business environments?

Can regions simply strengthen selected factors or must they improve across the board if they wish to remain competitive?

Based on in-depth econometric modelling and analyses, this report reframes the debate on regional policy and development, emphasising that opportunities for growth exist in all regions.

It concludes that regions should promote their own growth by mobilising local assets and resources so as to capitalise on their specific competitive advantages, rather than depending on national transfers and subsidies to help them grow.


 Table of contents

Acronyms and Abbreviations

Executive Summary

Chapter 1. Overall Growth Trends
Chapter 2. Analysing the Components of GDP Growth
Chapter 3. Assessing the Impact of the Main Determinants of Regional Growth


Annex A. The Components of Regional Growth
Annex B. Methodology for Decomposition of Factors and Growth
Annex C. Summary of Neoclassical and Endogenous Growth Models
Annex D. Main Models of the New Economic Geography
Annex E. Distance and Accessibility
Annex F. Spacial Econometrics




Why regions matter -
Developing regional economic growth


Mark Drabenstott, former Chair of the Territorial Development Policy committee, talks about why regions matter.









 How to obtain this publication


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 Further reading




For further information please contact Jose Enrique Garcilazo by email:



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