Towards a national urban agenda for Italy:

Economic rationale and governance issues

from an international perspective

Paolo Veneri Regional Development Policy Division

GOV OECD

L’Aquila, 28 May 2014

Outline

1. What is “urban”? Boundaries and influence of cities

2. The relevance of cities in the national economy: where does Italy stand?

3. Making cities more productive: the role of size and government fragmentation

4. Getting cities right: issues and approaches to metropolitan governance

Cities are defined as “functional urban areas” (FUAs) composed by one or more high-density cores and a connected low-density area. FUAs are clusters of municipalities that represent an economic area

The OECD has identified 1177 functional urban regions in 29 countries

1. What is “urban”?

In Italy: 4 large metro areas 7 metro areas 21 medium-size 42 small size

74 FUA s 51% of national population

1,177 FUAs in 29 OECD countries 67% of OECD population

1. Why the policy demands can be better supported by a focus on functional urban areas?

1. Better understanding of functional (economic, social and cultural) linkages within space. (e.g. account for externalities)

2. Better understanding – through international benchmarking with “similar peers”- of individual cities’ performance and potential.

3. Functional analysis of urban areas helps designing urban governance solutions.

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2. The relevance of cities in the national economies In the OECD, proximity to urban centres positively affects the performance of rural regions

Distance to the closest city and population growth in rural regions

Evidence from the OECD shows that: rural regions grow more the closest

they are to an urban centre

rural regions benefit from growth spillovers from urban regions

2. The relevance of cities in the national economies The weight of metro areas in the economy

Concentration of population, GDP and employment in metropolitan areas, 2010 (> 500k)

Italy

Source: Regions at a Glance 2013 - © OECD 2013

2. The relevance of cities in the national economies The contribution of metro areas to growth

% of national employment creation by metropolitan areas 2000-12

% of national GDP growth contributed by metropolitan areas 2000-10

Source: Regions at a Glance 2013 - © OECD 2013

2. The relevance of cities in the national economies The contribution of metro areas to innovation

% of patent application in metro areas and the rest of the country

In the OECD 65% of all patent applications were granted in metropolitan areas. However, Italy shows a much lower share of patents granted by metropolitan areas and also a lower amount of patents application per capita.

Source: Regions at a Glance 2013 - © OECD 2013

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3. Making cities more productive Bigger cities have a productivity premium

Elaborations on OECD metropolitan database

• Functional Metropolitan Areas often consist of several

hundred municipalities • => possibility of economic inefficiencies

– high costs of coordination – certain policies taken at municipal level are likely to have negative

effects on other municipalities (that are not internalised)

• Fragmentation may lead to suboptimal outcomes

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3. Making cities more productive The role of administrative fragmentation

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3. Making cities more productive City productivity premia decreases with municipal fragmentation

OECD estimates indicate that a twice higher number of municipalities per 100.000 inhabitants is associated with 5-6% lower productivity levels.

…Can specific metropolitan governance bodies help?

4. Getting cities right: issues and approaches to metropolitan governance

Share of metropolitan areas with a governance body (Results from an OECD survey, 2013)

Source: Ahrend et al. (2014)

4. Getting cities right: issues and approaches to metropolitan governance

Share of governance bodies active in selected fields

Source: Ahrend et al. (2014)

What a metropolitan governance can provide • Production of public goods • Achieve higher economies of scale (e.g. in service provision) • Capacity building • Account for negative externalities

Potential risks and bad outcomes • Transaction costs / additional burden • Risks of unbalanced distribution of benefits

among partners • Risks of focusing on output rather than of

outcome and actual needs of territories

4. Getting cities right: issues and approaches to metropolitan governance

• National policies affect urban development

National legislation establishes the ground rules for cities.

National governments intervene directly in a large number of policy domains that affect cities – yet explicit national urban policies are often narrowly conceived.

Inter-municipal co-ordination needs support from above.

• Major domestic policy challenges require a multi-level approach:

Neither cities nor national governments alone can address the main competitiveness challenges.

Environmental policies have a strong, place-based dimension, especially in cities.

Inclusive growth requires both economy-wide and local measures.

Policy coherence across levels of government requires national leadership

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• Improve co-ordination of national-level policies that affect urban development

• Increase the coherence between national and sub-national/ city-level policies and correct perverse incentives

• Provide levers to improve coordination across municipalities within urban areas

The rationale of an urban agenda

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Thank you!