why metropolitan governance matters · matters abel schumann – public governance and territorial...
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WHY METROPOLITAN GOVERNANCE MATTERS Abel Schumann – Public Governance and Territorial Development Directorate, OECD
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1. Urbanisation trends in a global perspective
2. The economics of urbanisation
3. Why do we care about metropolitan governance
4. What do we know about metropolitan governance
5. How to build effective metropolitan authorities
Agenda
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WORLDWIDE URBANISATION
3
1990
2010
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Urbanisation is proceeding at an
unprecedented scale
4
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0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1950-1970 1971-1990 1991-2010 2011-2030 2031-2050
Developed countries
Developing & emerging countries in Asia
Developing & emerging countries in other regions
5
The world’s urban population is growing
at the fastest speed
Source: UNDESA Population Division (2012), World Urbanization Prospects: The 2011 Revision
Number of new urban dwellers (1950-2050)
Bil
lio
ns
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6
The speed of Asian urbanisation is
unprecedented
1750 1775 1800 1825 1850 1875 1900 1925 1950 1975 2000 2025 2050
China, People's Rep. of
Bhutan
Lao PDR
Indonesia
Viet Nam
Asia and the Pacific
Europe
North America
Latin America andCaribbean
Number of Years from about 10% to 50% of Urbanization Rate
10% 49%210 years
9% 51%105 years
12% 51%150 years
11% 51%95 years
12% 50%90 years
12% 54%65 years
10% 52%60 years
10% 51%55 years
11% 51%61 years
Source: ADB estimates using Bairoch (2008) and UN(2012).
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Urbanisation is accompanied by an
increase in the number of mega-cities…
Source: Montgomery, Mark (2015), presentation at the 1st JRC urbanization workshop
Number of cities by population size
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…but mid-sized cities are still home to
the majority of the urban population
Source: Montgomery, Mark (2015), presentation at the 1st JRC urbanization workshop
Urban population by city size
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• What counts as urban?
– Denmark: Towns with more than 200 inhabitants
– Japan: Cities with more than 50,000 inhabitants
– Togo: 21 prefecture capitals defined in 1981
• The U.N. has data for 1779 cities that is based on
– 642 cities proper
– 974 urban agglomerations
– 163 metropolitan areas
Data can show us general trends, but needs to be used cautiously
A note about urbanisation data
Source: UNDESA Population Division, World Urbanization Prospects, 2014
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THE ECONOMICS OF URBANISATION
10
1990
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…but urbanisation alone is no
guarantee for economic success
Source: OECD calculations based on World Bank World Development Indicators (2014)
Economic performance and urbanisation from 1970-2005
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% 20% 40% 60% 80% 100%
GD
P p
er
ca
pit
a r
ela
tiv
e t
o t
he
Un
ite
d
Sta
tes
Share of urban population
Mexico
Urbanisation and per capita GDP
Note: Data points by country and year (1980-2013). Vertical axis: Per capita income as share of U.S. value Horizontal axis: Share of urban population.
Asia Latin America
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% 20% 40% 60% 80% 100%
GD
P p
er
ca
pit
a r
ela
tiv
e t
o t
he
Un
ite
d
Sta
tes
Share of urban population
Korea
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Normalised variation in labour productivity
between metro areas
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0,45
0,5
Note: Standard deviation of labour productivity across metro areas divided by mean labour productivity Source: OECD Metropolitan Database
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Share of GDP growth from metro areas
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: OECD Metropolitan Database
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Urbanisation can benefit economic
growth…
Agglomeration effects make larger cities more productive
15 Source: OECD (2015), The Metropolitan Century
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Larger cities have higher GDP per capita levels:
• They benefit from agglomeration effects – Larger local labour markets, faster spread of
ideas, more competition, more efficient use of infrastructure, …
– For a doubling in city size, productivity increases by 2% - 5%
• They have higher human capital levels
• They are often trade and transport hubs
• They offer opportunities for rent extraction
The economics of urbanisation
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Connectedness to cities also benefits surrounding regions
The economics of urbanisation
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Cities create agglomeration benefits – but also agglomeration costs
The economics of urbanisation
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The economics of urbanisation
Income inequality has increased most strongly in large cities
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WHY ARE WE INTERESTED IN METROPOLITAN
GOVERNANCE ?
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WHAT IS A CITY?
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Administrative boundaries are not the
answer
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• Definition of Functional Urban Areas based on population density in 1km2 cells that are matched to municipal boundaries and connected via commuting patterns.
• Urban centres are identified by aggregating densely populated 1km2 cells. Urban centres with at least 50,000 inhabitants are kept.
• They are matched with the boundaries of the lowest administrative level for which statistical data is typically available (NUTS5/LAU2)
• Urban centres and the less densely populated municipalities in the commuting zone are combined into Functional Urban Areas based on commuting flows (>15%).
• More info: OECD (2012) Redefining Urban
• http://measuringurban.oecd.org
Definition of functional urban areas
(FUAs)
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Horizontal administrative fragmentation is common as cities outgrow their historic boundaries (more than 10 local governments in 75% of OECD Metropolitan Areas; more than 100 in 22%).
This may lead to undesirable outcomes due to lack of cooperation and negative externalities.
Evidence from case studies points to administrative fragmentation indeed having negative effects.
This is confirmed by more systematic econometric evidence:
Ahrend, Farchy, Kaplanis and Lembcke (2014), “What Makes Cities More Productive? Agglomeration Economies & the Role of Urban Governance: Evidence from 5 OECD Countries”, forthcoming in Journal of Regional Science
Urban areas are highly fragmented
24
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City productivity & administrative
fragmentation
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What determines productivity in cities?
Focus on cities’ size and their governance structures
Evidence for 5 (+2) OECD countries: Germany, Mexico, Spain, UK and US; Netherlands and Japan
Empirical strategy: Two-step microdata based approach
(Combes, Duranton and Gobillon, 2011) :
i. individual (Mincerian) wage regressions to estimate the differential productivity levels of cities, controlling for sorting (on observables)
ii. explain the differential city productivity levels found in the first step by regressing them on a number of city explanatory variables
What determines productivity in
urban areas?
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• Productivity increases by 2-5% for a doubling in population size
• Productivity falls by 6% for a doubling in number of municipalities
What determines productivity in urban
areas?
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WHAT DO WE KNOW ABOUT METROPOLITAN GOVERNANCE?
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• Data focuses on permanent structures of cooperation: – Do Governance Bodies exist?
– What are their powers, fields of work, budgets, staff numbers, etc.?
– Who is represented on them?
• Governance Bodies can be classified in four categories – a) Organisations based on informal/soft-coordination
– b) Inter-municipal authorities • i. (Single-purpose)
• ii. Multi-purpose
– c) Supra-municipal authorities
– d) Metropolitan Cities
29
OECD Metropolitan Governance Survey
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• Approximately 280 metropolitan areas with more than 500,000 inhabitants exist in OECD countries
• Two-thirds of them have some form of metropolitan authority
• Great variety in tasks and competencies
Metropolitan Authorities
No metropolitan authority
31%
Metropolitan authority without
regulatory powers
51%
Metropolitan authority with
regulatory powers
18%
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Example: Effective inter-municipal
authority
• Established by state law • Covers 2.2 million inhabitants in 75 municipalities • Controlled by an assembly of municipal representatives • Budget 15 million euro • 123 staff members • Municipalities pay 5.66 euros per inhabitant
Facts & figures
• Creation and enactment of regional land-use plan that forms the basis for local land-use plans
• Support of municipal administrations in technical issues • Regional economic development • European affairs • …
Tasks
Regional association Frankfurt Rhine-Main
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Metropolitan Authorities: Fields of work
Three fields of work dominate
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
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• Urban sprawl creates negative externalities in Metropolitan areas (MAs)
• Cooperation is a way to internalize the externalities when making policy decisions
• -> Sprawl decreased in MAs with governance body, but increased in those without!
Governance bodies can reduce sprawl
Difference significant at the 99%-level after controlling for log-population levels and country specific trends.
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
1,2
1,4
With Governance Body
Without Governance Body
Change in Urban Sprawl
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Governance bodies can increase well-being
55%
60%
65%
70%
75%
80%
With Transport Authorities
Without Transport Authorities
Share of Citizens Satisfied with Public Transport • Citizens are more
satisfied in MAs that have sectoral authorities for public transport
• Those MAs have also lower pollution levels (PM)
Based on European Urban Audit perception survey. Difference significant at 95% level.
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• As previously mentioned, within countries, cities with fragmented governance structures have lower levels of productivity.
– For a given population size, a metropolitan area with twice the number of municipalities is associated with 5-6% lower productivity.
• Effect mitigated by almost half when a governance body at the metropolitan level exists.
Ahrend, Farchy, Kaplanis and Lembcke (2014), “What Makes Cities More Productive? Agglomeration Economies & the Role of Urban Governance: Evidence from 5 OECD Countries”, forthcoming in Journal of Regional Science
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Governance bodies positively affect
economic productivity
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• Attempt to increase evidence about metropolitan governance bodies
• Survey sent to Metropolitan Governance bodies in selected countries
– Austria, Canada, France, Germany, Mexico, Netherlands, New Zealand, Sweden, Switzerland, United Kingdom, and United States; main criteria language
• Managed to get reply from 56 Metropolitan Governance Bodies (response rate 40%) – roughly a quarter of existing MGBs in OECD countries
New work:
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0%
5%
10%
15%
20%
25%
Frequency (%)
Higher population
0
Source: 2nd Metropolitan Governance Survey, n = 56
Respondents by population size
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Source: 1st and 2nd OECD Metropolitan Governance Surveys
Positive selection bias? (Better organised
MGBs more likely to respond?)
28,9%
54%
0%
10%
20%
30%
40%
50%
60%
1st Survey (Based on Websites, n = 142)
2nd Survey (n = 56)
Share of MGBs with legislative or regulatory authority is higher…
51
30,5
0
10
20
30
40
50
60
Median MGB Staff (Based on Websites, n = 95)
2nd Survey (n = 56)
… but Median MGB staff is lower than the first survey
NB. Figures based on the same 11 countries (Austria, Canada, France, Germany, Mexico, Netherlands, New Zealand, Sweden, Switzerland, United Kingdom, and the United States)
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Los Angeles
London
Chicago
Dallas
Philadelphia
Munich
Dortmund
Hamburg
Miami Atlanta
Seattle
Stuttgart
Nuremberg
Cologne
Leipzig
Orlando
Vienna
St. Louis
Frankfurt
Stockholm
Kansas City
Charlotte
Austin
Raleigh
Portland
Auckland*
Amsterdam
Basel
Cuernavaca
Cleveland
Edmonton
Ottawa-Gatineau
Edinburgh
San Luis Potosí
Mérida
Karlsruhe
Zurich & Louisville**
Gothenburg
Geneva
Dayton
Augsburg
Tuxtla Gutiérrez
Baton Rouge Grand Rapids
Utrecht
Charleston Oaxaca de Juárez Wichita
Madison
Wellington
Strasbourg
Saint-Étienne Peoria
Saarbrücken
1
10
100
1000
200.000 2.000.000 20.000.000
Number of municipalities
covered by MGB
MGB Population
Log 10 scale
Log 10 scale
Source: 2nd Metropolitan Governance Survey, n = 56 *Auckland Council is a single municipality ** These 2 cities have almost the same population size and number of municipalities.
linear regression line
Population and municipalities covered by
MGBs
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21.2
78
1.5
15.5
0
10
20
30
40
50
60
70
80
90
Median Budget, USD per capita Median Staff
Legislative/Regulatory Powers No Legislative/Regulatory Powers
Source: 2nd Metropolitan Governance Survey, n = 56
MGBs with regulatory powers have larger
staff and higher per capita budgets
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79% 64%
80%
36% 38% 38%
18%
80% 75% 77%
43% 43%
34%
34%
80%
70% 73%
34% 45%
46%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Policy Facilitation
Provision of Technical Expertise
Monitoring & Data
Collection
Operational Management
Strategic Management
Allocation of Funding
Legislative & Regulatory
Regional Economic Development Spatial planning Transport
43% 34%
45%
20% 18% 25% 21%
30% 23% 30% 21% 23% 18% 13%
52% 50% 52%
29% 34%
30%
10%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
Policy Facilitation
Provision of Technical Expertise
Monitoring & Data
Collection
Operational Management
Strategic Management
Allocation of Funding
Legislative & Regulatory
Water and Sewage Waste Culture
Source: 2nd Metropolitan Governance Survey, n = 56
Functions of MGBs in Fields of Activity
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55% 52%
50% 49% 48%
43% 40%
17% 18%
16%
23%
20%
10% 13%
30%
0%
10%
20%
30%
40%
50%
60%
Characteristics of service provision Pricing of services
Share of MGBs in a field with influence on
service provision and pricing
Source: 2nd Metropolitan Governance Survey, n = 56
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MGBs' annual per capita budget and staff
for certain main fields of activity
4,5
26,4 33,6
30,5
103
126
0
20
40
60
80
100
120
140
Median (n = 56) Water & and Sewage Waste
Median Budget (USD per capita) Median number of Employees
Source: 2nd Metropolitan Governance Survey, n = 56
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64,3% 60,7%
41,1%
33,9%
26,8%
17,9%
12,5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Transfers - Interm. level
Transfers - Government
Transfers - Municipalities
Service provision fees
Charge member fees
Other sources** MGB can levy taxes
Source: 2nd Metropolitan Governance Survey, n = 56; ** - EU funds, foundations, …
Sources of Funding of Surveyed MGBs
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3,9
12,0
3,4
25,4
6,4
21,2
373
0
5
10
15
20
25
30
35
40
45
50
Transfers - Subnational
level
Transfers - Government
Transfers - Municipalities
Service provision fees
Charge member fees
Other sources**
MGB can levy taxes
Source: 2nd Metropolitan Governance Survey, n = 56
Median per capita budget (USD) by source
of funding
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62,5% 64,3% 42,9%
30,4% 16,1%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Local Governments (Municipalities)
Subnational Governments National Governments
A leading role A minor role
Source: 2nd Metropolitan Governance Survey, n = 56
Role of different levels of governments
in establishing MGBs
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44,6%
23,2%
23,2%
7,1%
1,8%
Mandated by national/state law
National or State law, non mandatory
Voluntary but enforceable agreement
Entirely informal agreement
Home rule charter
Source: 2nd Metropolitan Governance Survey, n = 56
Legal basis of surveyed MGBs
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1,9%
5,6%
18,5%
14,8%
1,9%
18,5%
25,9%
13,0%
0%
5%
10%
15%
20%
25%
30%
1920s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
Source: 2nd Metropolitan Governance Survey, n = 56
Year of establishment of MGBs Share of each decade
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Coordination necessary between:
• Great variety in approaches
• No one-size fits all solutions
• Appropriate tasks depend on local circumstances
• Different models within the same country can be appropriate
Policy coordination in metropolitan
areas
between local governments
across different policy areas
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Coordinated approaches
• Non-binding coordination (e.g. Gauteng Spatial Framework, South Africa, many MPOs, United States)
• Joint modelling and data (e.g. ITLUP, United States)
• Integrated authority (e.g. metropolitan cities in Korea, Stuttgart, Germany)
• National-government led planning (e.g. Copenhagen, Demark)
Metropolitan authorities
Transport planning
Land-use planning
• Often controlled by national/intermediate levels of government
• Often controlled by the lowest level of government
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• Policies not only need to be coordinated across jurisdictions
• Coordination across policy fields is equally important
• In particular, land use and transport policies need to be coordinated in metro areas
– Both policy fields highly complimentary
– Good outcomes in one field only possible with good outcomes in the other field
Good governance for metro areas
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When considering metro governance reform, pay attention to the reform process
• Focus on the outcomes that are supposed to be achieved
• Encourage long-term cooperation between involved actors
• Compensate actors that lose from the reform
• Monitor outcomes of the reform to judge if it is effective
Good governance for metro areas
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HOW TO BUILD EFFECTIVE METROPOLITAN AUTHORITIES?
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Identify metropolitan projects to motivate collaboration
Build ownership among key stakeholders
Create reliable sources of metropolitan financing
Provide incentives and compensation for compromises
Implement a long-term process for metropolitan monitoring and evaluation
5 Steps for effective metropolitan
governance reform
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• Creation of the Rhein-Main Transport Authority (Frankfurt 1995)
Integrated Public Transport System
• Creation of the Organisation for Planning and Environmental Protection (Athens 1985)
Olympic Games
• Creation of the Chicago Metropolitan Agency for Planning (2005)
GO TO 2040 Plan
Identify projects to motivate
collaboration
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National government leadership!
Support from intermediate levels
of government
Private sector backing
Engagement of the civil society
Involvement of universities to
develop metropolitan
strategies
Create ownership among key
stakeholders
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Own sources
Property tax
Income tax
Sales tax
Business tax
Congestion charges
Public transport fees
Parking fees
Transfers
Equalisation grants
Unconditional grants
Conditional grants
Capital finance
Development Charges
Land-value capture
Concessions
Bond issues
Ensure reliable sources of funding
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Every reform creates losers
Compensate them!
Provide incentives and compensation
Examples Fiscal incentives
Greater flexibility in deciding how to cooperate
Greater political powers
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It is never guaranteed that a reform succeeds
Specify objectives that are supposed to be achieved in advance
Monitor if progress towards the objectives is made
Adjust, if the reform is not effective in achieving desired outcomes
Metropolitan monitoring and evaluation
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