Regional Development Policy:
Rationale, Multi-level Governance and
Evaluation
By Fabrizio Barca *
Moscow Round Table
January 26, 2007
Ministry of Economy and Finance, Italy
1
Fabrizio Barca
Regional development policies
“… we face the somewhat paradoxical
spectacle of Europe being taken more
seriously from outside than from within.”
Roy Jenkins (as President of the Commission of EU),
Jean Monnet Lecture
Florence, 27 October 1977
2
Fabrizio Barca
Regional development policies
REGIONAL OR PLACE-BASED DEVELOPMENT POLICY: A DEFINITION
Old policy

New policy 
A policy aimed at compensating for regional gaps in
productivity by providing sectorial public goods and / or
subsidies to firms or labour
A policy aimed at increasing productivity by providing
integrated baskets of local public goods through (mostly) local
and regional projects devised and selected according to
standards agreed at national and / or super-national level
3
Regional development policies
Fabrizio Barca
RATIONALE OF REGIONAL DEVELOPMENT POLICIES
Region’s output at time t1
Region’s output at time t2
Effective
Effective
Potential:
• endowment of:
human, natural and cultural resources
institutions (and competition, and image)
public goods
• potential location externalities:
among individuals
among firms (agglomeration externalities)
of firms/individuals with nat/cult resources
Potential
Regional / place-baced policies
Exogenons push / shock
• awareness of externalities at local level
• capacity/willingness to pool local knowledge
• absorption/attraction of external knowledge
• national
• international
• public goods and institutions
• market competition for public goods
4
Regional development policies
Fabrizio Barca
GOVERNANCE: LOCAL IS NOT ENOUGH
Local government:
• pooling knowledge*
• developing projects*
*Moved up to the other levels if required by
scale/scope
Local government
Pros
• availability of knowledge to pool
local knowledge
• incentive to produce results
• capacity to tackle unforeseen
contingencies
Cons
• renegotiation problem
• “local boundary” problem:
underproduction of public goods
• overproduction of public goods
• “falling behind” problem
• the trap of localism
Regional government:
• promoting the establishment of
appropriate ”local boundaries”
• selecting and/or promoting local projects
according to grant conditionalities
• governing coordination among locations
Multilevel
governance
Central / National government:
• allocating grants to territories and to main
priorities
• establishing, monitoring and sanctioning
grant conditionalities
• governing coordination among “regions”
• providing technical assistance, capacity
building and links with external knowledge
Federal / Supernational government:
• setting general strategic priorities and
some grant conditionalities
• enhancing credibility of central government
• governing coordination among central
governments and/or promoting forum for
exchange of methods and experiences
• providing technical assistance and capacity
building
5
Regional development policies
Fabrizio Barca
MULTILEVEL GOVERNANCE: MAIN INGREDIENTS
I. A unique undivided Fund, with:
 co-financing
 additionality
 multi-year commitment
II. Reshaping of responsibilities:
1. a super-national credibility-enhancing authority
2. a unique national gate-keeper, establishing, monitoring and sanctioning conditionalities
3. a capable local government with responsibilities to allocate resources
III. A conditional granting system based on:
1. a mix of participatory and evaluation culture
2. an “incomplete contract framework”
3. targeting
IV. Knowledge pooling at local level via a mix of:
 negotiation
 evaluation
V. Macro-evaluation and political sustainability
6
Regional development policies
Fabrizio Barca
II.1 A SUPER-NATIONAL CREDIBILITY-ENHANCING AUTHORITY:
THE CASE OF EUROPEAN UNION
Pros
• promoting a “regional approach”
• enhancing central government credibility and providing a leverage for change
• promoting economic and social partnership in programming
• providing potential cross-countries comparability
• promoting across-borders regional policy
Cons
• setting top-down hyper-rationalist conditionalities
• establishing a “compliance approach” to evaluation
Missed opportunity (until now)
• promoting true strategic thinking at high administrative and political level
• promoting horizontal coordination among countries
7
Regional development policies
Fabrizio Barca
III.2 INCOMPLETE CONTRACT FRAMEWORK
The problem
Committments are needed:
 between private and public agents at local level
 among levels of government (vertical)
 among sectoral responsibilities (horizontal)
but they cannot be written in a fully verifiable way
Solutions to avoid
•
•
write contracts as if they were complete (hyper-rationalist)
write no contracts and fully rely on “participation” (hyper-participatory)
Solution
 mix evaluation and participation culture, i.e. …
 … write incomplete contracts with open-ended objectives/rules plus:
• a system of “fiduciary duties” to fill the rules ex post
• and a mechanism to produce information on the objectives/rules
• and a mix of reputation / repeated game / trust
8
Regional development policies
Fabrizio Barca
III.3 TARGETING CAPACITY BUILDING WITH A REWARD / SANCTION SYSTEM:
HARD USE OF INDICATORS IN THE MEZZOGIORNO CASE
Problems
• measurement
• responsibility
• renegotiation
• incomplete contract
Solution
•
•
set open-ended targets
set an evaluation system:
 run by a body composed of principal and agents
 produce periodical Reports
 and using it as a “Knowledge producing mechanism”
It allows
•
•
•
•
measurement to be refined
targets to be “completed” / interpreted
actions to be taken if responsibility is shared
renegotiation risk to be reduced
9
Regional development policies
Fabrizio Barca
III.3 TARGETING IN THE MEZZOGIORNO CASE: RESULTS
Resources assigned on the basis of the competitive mechanism
(as a share of potential resources)
6% Performance Reserve
Regions
Ranking
1
2
3
4
5
6
Basilicata
Campania
Puglia
Sicilia
Sardegna
Calabria
134,9
98,2
88,9
79,5
40,9
38,6
Puglia
Sicilia
Campania
Basilicata
Sardegna
Calabria
108,6
107,6
103,9
103,3
102,8
62,5
Public Administrations
Ranking
1
2
3
4
5
6
7
4% Performance Reserve
Econ. Competitiveness
Education
Research and Dev.
Law Enforcement
Fishing
Trasportation
-
129,8
77,0
70,6
57,8
51,4
49,2
Education
Research and Dev.
Fishing
Econ. Competitiveness
Technical Assistance
Law Enforcement
Trasportation
157,1
130,0
109,5
109,5
108,9
107,9
50,0
10
Regional development policies
Fabrizio Barca
V. MACRO-EVALUATION AND POLITICAL SUSTAINABILITY: THE
MEZZOGIORNO CASE
Macro-evaluation as a coherence framework to
• link micro to macro
• give structure to polical debate
EX ANTE  Mezzogiorno plan 2000-2006: a supply–side model with “break variables”
INTERIM  Yearly Reporting and Interim evaluation Report:
• limiting renegotiation of financial commitments
• allowing a fair assessment of policy
EX POST  Providing a base for policy changes by basing 2007-2013 Plan on ex post
evaluation
11
Fabrizio Barca
Regional development policies
V. CONTEXT INDICATORS: REGIONAL COMPARISON (Italy = 100)
Source: Italian Ministry of Economy and Finance, 2005 Annual Report
12