Urban regions as engines of economic growth

Otto Raspe, Martijn van den Berge, Thomas de Graaff
(2018) PLB (planbureau voor de Leefomgeving), Den Haag, 3296

Online

summary

In new regional economic policies, national and regional agendas are aligned and reinforce each other.

The agendas are based on a joint strategy that combines policy areas; policies aimed at strengthening the economic structure also encompass plans of action for human capital, the residential environment, the physical environment and infrastructures.

Government authorities can make a difference to regional economic growth.

In economically successful regions, government authorities play an active role by facilitating growth processes and investing in them. The role of regional authorities to formulate a joint strategy (all involved are of like mind) and to develop alliances between public and private parties and with national and provincial authorities. This is done by streamlining generic policies towards regional tasks. In successful regions, policies focus on factors that are critical for growth and innovation, and on creating places that are attractive to live and work in. This usually involves establishing a coherent mix of policy areas, for example by coordinating programmes for clusters, entrepreneurship, the labour market, knowledge, accessibility and the physical and residential environments.

There is no such thing as a uniform path to economic success.

Regional economic developments vary widely and are context-specific. Moreover, economic growth is path-dependent; historical structures and past events determine the course of subsequent developments. The challenge is to find a suitable policy mix around a common goal that is in line with the economic structure and dynamism of the region. The core concept is innovation and diversification, building on existing structures. Regional economic policies therefore combine present-day strengths, but also focus on the transformation to new activities and technologies.

There are, however, robust factors that stimulate economic growth, or, conversely, obstruct it.

It proves beneficial to focus policies on a number of robust factors that are positively or negatively linked to growth in both employment and productivity. The quantitative analyses in this study show that economic growth is stimulated by factors such as human capital (a very qualified labour force), attractive conditions for living and working with an interesting range of facilities (quality of education, and numerous cultural amenities and restaurants), and good accessibility in both physical and digital terms. Growth is hampered by a high cost of living, polluted air and noise pollution.

Growth is often sector-specific.

What works fine for one sector does not necessarily work for another. For example, clustering and specialisation in technology and materials are important for growth in industrial companies, whereas the growth in knowledge-intensive services is mainly linked to the quality of human capital.

Growth is often context-specific.

In regions with high population density, the impact of knowledge and culture on economic growth is particularly strong. Density brings agglomeration benefits and is in itself robustly linked to growth, but in combination with knowledge and culture, its effect is reinforced. The impact of density is also more marked in cities with good international connectivity.

It is a matter of having a policy mix aimed at a total innovation system.

The qualitative analyses in this study reveal that in economically successful cities, government authorities have made express efforts to anticipate, facilitate and invest. In these places, there has been a shift in recent decades from policies with a physical orientation, focusing on spatial planning and infrastructure, to policies aimed at establishing an overall innovation system. Programmes for entrepreneurship, clusters, knowledge and innovation have become important elements of a policy mix whose specific details are worked out according to the regional context. Thanks to this policy mix, regional authorities have contributed to ensuring that economic renewal could take place in a bottom-up process in a timely fashion. They achieved this by creating critical mass around the new and promising economic activities that were emerging in the region. But, they also stimulated innovation in sectors that had a strong presence in the region and were in danger of entering a phase of decline.

Backing challengers is a priority in policy.

Policies are not aimed at ‘picking winners’, an approach that involves opting for certain sectors. Nor are they aimed at ‘backing losers’, in efforts to maintain sectors that are performing badly. They are best characterised as ‘backing challengers’; they stimulate both innovation within the existing structure and the challengers of the established order. By making this concrete in the form of a policy mix, promising new activities, which are in line with the economic activities, technologies, themes or challenges in the region, are able to prosper.

Policies make choices.

While urban planning aimed at creating attractive cities with a high quality of life can be beneficial to entire populations and all businesses, its actual interpretation is often specific to a region or city. Policies in successful cities focus strongly on certain economic objectives or target groups. In practice, this can involve, for example, creating attractive residential conditions and facilities for knowledge workers, or creating working conditions for specific new economic activities that are in line with the knowledge and innovation policy. Key issues here are the desired economic structure and geographic location in relation to other cities.

In economically successful regions, the institutions are structured under public-private, multi-level (national, regional and local) and cross-sectoral cooperation. Institutions are proactive and able to adapt, allowing modification by government authorities to suit changing circumstances, anticipation on future problems and the search for new opportunities.

Growth can be based on unplanned events.

Many growth processes are therefore path-dependent. In the initial phase, when it is not clear whether growth will actually take place, steering the process is a far more uncertain exercise than facilitating and promoting innovation from existing growth paths.

Both the national and the regional level.

National governments can also play an important role in regional economic developments. National policies have effects at the regional level and, if they are customised, they could effectively fit in with regional contexts and regional policy initiatives. In addition, there are several matters that can be dealt with more readily by national authorities than by regional authorities. Examples include safeguarding national or supra-regional interests, operating above the level of the regional lobby, and providing a knowledge and monitoring system to analyse and assess economic developments.

These findings follow from quantitative and qualitative research into the question of which policies are effective when aiming to support the potential for urban and regional growth. They provide policymakers with insight into issues that are important for economic growth and into how policy efforts can contribute to economic growth. This report presents a menu, so to speak, of policy options.