Regional and local economics
An international problem: Regional
policy in other major OECD countries.
Aims
 Examine the regional problems experienced by other major
OECD countries up to the late 1970s
 Review the policies employed by governments and other
agencies to ameliorate regional disparities
 Compare and contrast the policy approaches adopted by the
major OECD countries.

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Study carried out by OECD in latter part of 70’s, aim to promote
economic growth and best practice.
Background - economic slowdown, industrial restructuring, rising
unemployment, widening economic disparities.
Concentrate on Canada, France, West Germany, Italy, Japan,
USA and UK
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 1
Regional and local economics
National situation

Canada - Unemployment on the high side - labour force
growing faster than the population - GNP growth 8.5% pa structural change (services)

France - Unemployment increasing - labour force growth
driven by immigration - GDP increased 66% in 9 years productivity up -structural change (industry & services)
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Germany - Unemployment increasing - labour force growing
migrant workers - GNP growth 4.7% pa - structural change
(manufacturing & services)

Italy - Unemployment on the increase - increasing labour force
and high emigration - GNP growth 5.6% pa - high levels of fixed
investment - low incomes - structural change (manufacturing &
services)
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 2
Regional and local economics
National situation (Cont.)

Japan -Little official unemployment - high population densities
- GNP grown 2.5 times in 10 years - massive industrial
expansion Rural urban drift
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USA - Unemployment on the high side (8.5%) - GNP growth
5.3% pa - uneven development - largest economy - income
levels high

UK - Unemployment increasing <4% - labour force
restructuring - GNP growth 2.5% pa - structural change
(manufacturing decline)
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 3
Regional and local economics
Regional problems

Canada – Spatial development uneven - disparities in per
capita income, investment and unemployment
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France – Rural urban shift - overheating and slowdown growth in Paris decline in countryside and old industrial areas disparities in per capita income

Germany - Rural urban shift - uneven employment growth disparities in per capita income - distressed areas small with
week industrial structure
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Italy - Dualism - backward south, little industrialisation - relative
disadvantage widespread and concentrated - Rural urban drift
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 4
Regional and local economics
Regional problems (Cont.)

Japan – Spatial development uneven - disparities in per capita
income - signs of counter urbanisation - congestion - over and
under concentration
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USA – post urbanisation - population and industrial
displacement - energy - transport - metropolitan constraint - rural
poverty - urban distress
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UK - Some counter urbanisation - industrial contraction
concentrated - disparities - migration - stagnation - worn out
infrastructure
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 5
Regional and local economics
Regional policies

Canada – (2% of national budget) Industrial incentives (Capital and
Labour): Infrastructure (depressed areas only): Social and resource
development (training and natural resource)
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France – (0.5% of total government budget) Employment guidance
(location controls, subsidy): Urban town policy (growth poles, land and
urbanisation): Infrastructure (transport and communications)
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Germany - (0.13% of national income) Industrial incentives (Grants,
tax incentives, government contracts): Infrastructure (industrial sites,
tourism, training)
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Italy - 10% of central government spending) Direct action by the
State (land reform, investment, location controls): Industrial incentives
(Capital, tax breaks, graded): Cassa per il Meezzogiorno
(Infrastructure, training)
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 6
Regional and local economics
Regional policies (Cont.)

Japan – (0.73% of public consumption) Industrial incentives
(to move): Infrastructure (grants to local government): Nationwide planning system (agencies - land use ED, venture finance)
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USA – Federal measures (infrastructure, spending, grants,
tax): Departmental and agency (public works, training):
Economic Development Administration (business loans, grants,
planning)
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UK - (1.9% of government expenditure) Industrial incentives
(Capital and Labour): Infrastructure (sites, social capital, rural
development): Relocation (controls, dispersal, strategic
planning)
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 7
Regional and local economics
Regional policy organisation
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Canada – Centralised but with local delivery
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France – Centralised with regional co-ordination
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Germany - Shared between Federal and Regional
Government
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Italy - Central government co-ordination regional bodies
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 8
Regional and local economics
Regional policy organisation (Cont.)
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Japan – Central government ministries, special bodies, local
government.
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USA – Federal objectives, criteria & funding local delivery
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UK - Centralised, local input land use (within national
guidelines) no national plan
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 9
Regional and local economics
Matrix of Regional Aid late 1970s
Form of aid
Canada
France
FDR
Italy
Y
Y
Y
y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Japan
USA
UK
Total
Y
Y
Y
Y
5
5
Y
Y
Y
Y
Y
3
5
Y
Y
Y
Y
Y
Y
Y
3
6
6
Y
Y
Y
Y
Y
Y
Y
Y
Y
4
2
4
4
Investm ent Grants
Machinery and Equipm ent
Industrial buildings
Prem ises
Factory Buildings
Industrial land and sites
Y
Business Loans
At Mkt. rate
At subsidised rate
Guaranteed
Y
Y
Y
Y
Fiscal concessions
On investm ent
On profits
Y
Y
On investm ent aid received from state
On state charges, local taxes, licence fees etc.
Y
Other grants & Concessions
Y
Grants tow ards labour costs
Y
Y
Y
Y
Y
Y
Grants tow ards employment costs e.g. social security
Assistance tow ards operating costs
Y
Y
Assistance tow ards m oving and settling in (firm )
Aids to m anpow er m oving and re-location
State shareholding
Y
Y
Transport and public service concessions
Preferential treatment in aw ard of government contracts
Manpow er training aids
Total
Y
Y
Y
5
Y
13
10
Y
16
Y
7
3
Y
Y
Y
Y
Y
Y
16
2
1
3
4
4
2
1
2
4
Source: OECD
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 10
Regional and local economics
Conclusions
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All major OECD countries have regional disparities and
problems
Difficult to estimate a comparative measures of expenditure
across all countries - Italy, the UK and Canada are amongst the
highest spenders
European countries employ far more instruments aimed directly
at stimulating industry than those in Japan and the Americas.
Almost all countries use subsidised loans or loan guarantees,
investment grants and make available industrial land/sites,
Few offer grants towards employment and labour costs, state
shareholding or overt preferential treatment in award of
government contracts
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 11
Regional and local economics
Further reading
 Organisation of Economic Co-operation and Development, (1977)
Regional Policies - The Current Outlook, OECD, Paris
 Organisation of Economic Co-operation and Development, (1976)
Regional Problems and Policies - In OECD Countries, Vol.1,
OECD, Paris
 Organisation of Economic Co-operation and Development, (1976)
Regional Problems and Policies - In OECD Countries, Vol.2,
OECD, Paris
 Organisation of Economic Co-operation and Development, (1980)
Regional Policies - In the United States, OECD, Paris
 Organisation of Economic Co-operation and Development, (1979)
The Role of industrial Incentives in Regional Development,
OECD, Paris
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 7b
Slide 12