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Multi-level governance, which can be understood as the exercise of authority and the various dimensions of relations across levels of government, has changed over the last two decades. In particular, decentralisation has made local and regional governments more powerful and supposedly increased their capacity to formulate and deliver policy. Local and regional governments, concerned that their economies are increasingly exposed to global competition, now expect to influence public policies so that they have a real and positive impact on improving the competitiveness of the regional economy and the well-being of residents. These trends have made governance of public policies both more complex and more demanding, involving multiple actors (public but also private) and requiring a rethinking of how central and sub-national governments should collaborate.
OECD work on multi level governance addresses these “new” forms of governance. The work has two main dimensions: vertical and horizontal. The “vertical” dimension refers to the linkages between higher and lower levels of government, including their institutional, financial, and informational aspects. Here, local capacity building and incentives for effectiveness of sub national levels of government are crucial issues for improving the quality and coherence of public policy. The "horizontal" dimension refers to co-operation arrangements between regions or between municipalities. These agreements are increasingly common as a means by which to improve the effectiveness of local public service delivery and implementation of development strategies. Recent work is focusing on the contractual approach of multi-level governance, the design of grants transferred from central to sub national levels of government and the variety of agreements between municipalities. Multi level governance is a key theme in the national territorial reviews and in work on urban and rural regions. This theme is also related to the OECD Network of Fiscal Relations across Levels of Government.
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