This chapter develops a policy framework to address demographic change with respect to population decline and ageing – from its main trends and drivers to its impacts and policy implications. It also provides policy recommendations that reflect the key pillars of the policy framework and translate them into actionable guidance. The framework and the policy recommendations are designed to help policy makers in OECD countries, regions, and cities respond to the challenges and opportunities associated with demographic change.
Shrinking Smartly and Sustainably
Strategies for Action
Abstract
1. Population decline and ageing are a reality for many OECD regions and cities
Demographic change (i.e. population decline and ageing) is widespread in OECD countries. Seven OECD countries have seen their populations decline in the last two decades, old-age dependency ratios are generally increasing and fertility rates have significantly decreased (Chapter 2).
“Depopulating regions” are characterised by a substantial and sustained decrease in population and fast ageing due to a combination of factors:
1. Low fertility rates below replacement rates. Fertility rates have fallen from 2.84 children per woman in 1970 to 1.59 in 2020 on average across OECD countries (OECD, 2023[1]), with almost all countries standing below the replacement fertility rate (2.1). The drop of fertility rates is driven by both socio-economic (e.g. low incomes, lack of opportunities) and cultural factors (e.g. delayed age of young people leaving their parental household and delayed marriages, preference for smaller families, or concerns for the future) (Coulmas, F. and R. Lützeler, 2011[2]) (UNFPA-UNDP, 2020[3]). When fertility rates fall below the replacement rate over substantiated periods (i.e. an increasing share of old-age population in the total population), low or no immigration can lead to population decline (Fluchtmann , J. & Van Veen, V. & Adema, W., 2023[4]). In a vicious cycle, places suffering from out-migration of youth will experience accelerated rates of ageing, high age dependency ratios and a declining share of population in reproduction age, leading to falling birth rates. These factors make it less attractive for the youth population and thus fuel further emigration of youth, lower birth rates and more population decline.
2. Increasing life expectancy. In 2021, life expectancy at birth was 80.3 years on average across OECD countries – 10 years higher than it was in 1970 (OECD, 2023[5]). Infant mortality dropped from 27.8 deaths (per 1 000 live births) in 1970, to 8.8 in 1995, and 4.1 in 2020 (OECD, 2021[6]). The direct consequence of high life expectancy paired with low fertility rates is an ageing population.
3. Negative net migration. The movement of people out of a region (out-migration) or out of a country (emigration) contributes significantly to population decline in that region/country. People move due to two main interrelated reasons: (1) the search for greater economic and employment opportunities; (2) the search for a better quality of life, including access to quality jobs, services, infrastructure, cultural and leisure opportunities. Relatively qualified, young people are the most likely to emigrate, which leads the regions of origin to have a greater concentration of more vulnerable and older populations. While international migration explains why some countries experience population growth despite having low fertility rates, reversing population decline through migration would, in some cases, require sustained inflows of people of reproductive age. International migrants also tend to concentrate in cities – especially large ones: the share of migrants is twice as high in metropolitan regions compared to other regions. This contributes to diversity in cities but also means international migration has limited power in contributing to stabilising populations in areas that are not attractive to migrants.
2. Population shrinking will spread and accelerate in the coming decades
By 2060, 14 OECD countries are expected to decline in population. And while in some countries the overall population will not decline, some places within these countries will face population shrinkage. The future also holds fundamental changes in age structures across OECD countries: the number of children under 5 years is expected to decline from 63.5 million in 2021 to about 59.2 million in 2040 whilst the number of people over 80 is expected to nearly double, from 66.5 million to 114.7 million (OECD, 2023[7]). These population projections have stark implications for old-age dependency ratios in OECD countries: while in 2021 there were about 13 working-age people (15-64 years old) for every person older than 80 years, in 2040 there will be only 7.
It is likely that regions facing population decline will continue shrinking over the next decades. Almost all OECD countries, with the exception of Israel (3.0), have a fertility rate below the replacement rate of about 2.1 children per woman – the necessary level to sustain the population in the long term in the absence of migration or negative net migration (OECD, 2025[8]). The mean age of women at childbirth in OECD countries has risen from 28.5 years in 2000 to 30.7 years in 2020 (OECD, 2023[9]). Some OECD countries are adopting policies to encourage births and facilitate the well-being of parents, including through financial incentives. However, these policies have had limited impact on reversing declining fertility trends, which are shaped by a wider set of social, economic, and cultural factors – including changing lifestyles, career choices, and family preferences.
3. Demographic change has a strong territorial dimension and impacts regions and cities differently
Remote regions are most affected by population decline. About 36% of OECD remote regions experienced population decline over 2001-22, compared to 13% of large metropolitan regions (OECD, 2023[7]). Amongst the regions where the population has declined since 2001, 58% were far from a midsize or large Functional Urban Area (FUA). Remote regions – where old-age dependency ratios stood at 31% in 2019 – experienced, on average, the largest increases in old-age dependency between 2003 and 2019 (a 0.9 percentage point increase). In 70% of OECD countries with regions far from a midsize/large FUA (23 out of 33) in 2022, old-age dependency ratios were the highest in regions far from a midsize/large FUA (OECD, 2020[10]). And in 2022, 24% of non-metropolitan regions (382 out of 1526) had an old-age dependency ratio above 40% (OECD, 2023[11]).
While shrinkage is more marked in remote regions, population decline is also happening in urbanised regions. Across OECD countries, 21 % of “metropolitan midsize” TL3 regions and 10% of “metropolitan large” TL3 regions lost population over 2001-211 (OECD, 2023, p. 23[7]). Many cities are also affected by population decline, either short or long-term. For instance, during the sudden shock of COVID-19, the share of shrinking cities in Europe reached a rather staggering figure of 63% (Wolff, M. % Mykhnenko, V., 2023[12]). Smaller cities have been more severely affected. In the European Union, 40% of cities with fewer than 250 000 habitants lost population between 2011 and 2021, a trend comparable to towns, 43% of which experienced population decline, while population loss occurred in 28% of cities with 250 000 inhabitants or more (OECD, 2024[13]). In Japan, almost 90% of cities lost population, especially in those with fewer than 500 000 inhabitants (Burgalassi and Matsumoto, 2024[14]).2
4. Demographic change brings economic, social, and environmental structural challenges
Changes in the scale and composition of the population – especially when they happen rapidly – can have wide-ranging impacts on:
1. Economy and the fiscal base. Population decline is often accompanied by a decline in the labour force and a declining share of the working age-population, which is projected to drop from 64% in 2022 to 60% in 2050 in OECD countries (OECD, 2023[15]). Labour shortages can affect business activity, employment, and hence consumption and economic growth. At the same time, population ageing is reshaping the labour force. Older workers bring valuable experience and stability, but an ageing labour force may, on average, be less geographically mobile and less likely to change jobs, which could affect overall labour market dynamism and the pace of skills renewal – potentially impacting productivity and long-term growth. Population decline also reduces the tax base and revenue from user fees for public services. This challenge is particularly acute in depopulating areas, where declining populations reduce economies of scale and increase the cost of delivering services. For example, annual costs per student in sparse rural areas are 20% higher in primary schools and 11% higher in secondary schools compared to cities. In contrast, larger urban areas are generally better able to absorb these effects. These demographic shifts can strain national and subnational government budgets and fiscal systems. In addition, ageing also leads to higher costs of provision per person, not only because of smaller scale economies, but also due to rising healthcare needs and long-term public pension expenditures (OECD/EC-JRC, 2021[16]) (OECD, 2024[17]).
2. Service and infrastructure delivery. Population decline and ageing create issues of over-supply and over-capacity as demand for housing and certain public services (such as education) decreases, while demand for other public services increases, as is the case for long-term and health care services and infrastructure adapted to the old-age population. This can create mismatches between the infrastructure that is in place and the infrastructure that is needed to satisfy the demands of current and future population. Although the variable operating costs of infrastructure will fall concurrently with population decline, shrinking will lead to higher per-capita fixed operating costs, especially in those areas where densities are lowest (OECD, 2021[18]) (OECD/EC-JRC, 2021[16]).
3. Land use and spatial planning. As tax bases decrease and per capita costs of service and infrastructure provision increase with demographic change, the need to develop efficient land use and spatial development plans grows. Spatial planning needs to ensure settlements, infrastructure and public services remain accessible to all age groups, including vulnerable people, such as the elderly, chronically ill, or families with weak education backgrounds who need additional services.
4. Governance. As populations dwindle, demographic change can challenge the effectiveness of existing institutional and territorial structures to govern their jurisdictions and provide services and infrastructure. Shrinkage can also reduce the human resource capacity of subnational governments, leading to inefficiencies in resource allocation, policy implementation and decision-making.
5. Social challenges. Shrinkage and ageing are coupled with decreasing household sizes, as a result of a combination of factors, including low fertility rates, decreasing marriage rates, rising divorce rates, postponement of family formation, and childlessness (OECD, 2011[19]). The average household size across OECD countries dropped from 2.8 persons in the mid-1980s to 2.5 in 2015. In particular, OECD countries show an increasing number of single-adult households (i.e. households comprising only one adult, living with or without children). A changing household composition is also rising risks of loneliness, with related challenges in terms of mental health (Burgalassi and Matsumoto, 2024[14]).
6. Civil society. Out-migration of younger populations as well as the closure of schools, community centres, and other public facilities (e.g. libraries) can impact social cohesion and local community vitality (Beunen, R., Meijer, M., de Vries, J., 2020[20]). Greater sparsity due to population decline can also mean poorer connectivity and typically implies longer journeys to access all types of services. All these factors combined can lead to potential social discontent and reduced levels of trust in governments (Allain-Dupré D., 2022[21]) (Mitsch, 2021[22]).
7. Environment. The willingness by policy makers to admit that some regions and cities are shrinking is an important prerequisite to initiate measures and strategies (Pallagst, 2017[23]). Spatial planning policies which do not consider depopulation risk generating unnecessary artificialisation of surfaces and construction. While depopulating regions’ contribution to environmental degradation may be modest, such effects would be inconsistent with efforts to avoid negative environmental impacts from the degradation of land, natural space, and biodiversity, as well as from the environmental footprint of construction materials. Sprawled settlement also raises CO2 emissions from cars, energy demand and related infrastructure needs. Ensuring sufficient zero-emission energy supply is a major challenge to reach climate neutrality. This can make low-density areas more vulnerable. On the other hand, some depopulating regions may have opportunities from contributing to renewable electricity supply provided business models to exploit them share benefits with residents. Some of these regions can also become more vulnerable to rising climate hazards.
All the above-mentioned impacts are closely interrelated, producing compounded and self-reinforcing indirect effects that puts depopulating regions and cities at risk to enter into downward spirals of decline (Haase et al., 2014[24]). For instance, a reduced local tax base, compounded with increasing building vacancies, can led to a deteriorated urban fabric, business, and job losses, which can dramatically reduce territorial attractiveness and increase social tensions and discontent.
5. With the right policy framework, demographic changes can coexist with high-living standards
Population decline and ageing do not necessarily mean declining well-being. Demographic change can in fact bring new opportunities.
Shrinkage can reduce environmental impacts and offer opportunities by reducing pressures on the environment, and by protecting and restoring ecosystems. This can contribute to meeting global environmental targets on biodiversity, climate change and the degradation of land, while generating local amenities and opportunities.
Efforts to manage demographic change can encourage policy makers to promote social innovation, digitalisation, and new technologies, as well as to experiment with innovative governance and public service delivery mechanisms that both incorporate sustainability goals and aim for increased efficiency of public spending (OECD, 2021[18]).
Demographic change can stimulate innovation and resource-sharing in the provision of public services. For instance, inter-municipal co-operation in FUAs can help provide flexible and demand-responsible services for citizens (e.g. in public transport). In depopulating regions, there is also a need for co‑ordinated provision among urban and rural areas (OECD, 2022[25]). Digitalisation and artificial intelligence (AI) not only support smart city solutions but also offer practical responses to service delivery challenges in depopulating regions (OECD, 2023[26]) (Bournisien de Valmont, M., 2024[27]). In health and elderly care, AI can ease labour shortages by automating routine tasks, enabling remote monitoring, and supporting clinical decisions, especially where populations are ageing rapidly and health systems are under strain (OECD, 2024[28]).
Economic opportunities can arise from increasing consumer expenditure by an ageing population as well as from the potential of the silver economy and its capacity to generate new business opportunities. An expanding ageing population can drive increased demand for healthcare, elderly care services, and dedicated infrastructure, which are industries incorporating advanced technology and with a strong potential to generate multiplier effects on business creation and employment (Burgalassi and Matsumoto, 2024[14]).
Finally, demographic change can also favour old-age inclusion, provide pathways for old-age population to continue to contribute to local communities and, therefore, prevent social isolation. For instance, old-age population can be engaged to support families in reconciling work and family duties. In cities, neighbourhoods with diversified housing options and adopting Universal Design approaches (aiming at creating buildings that can be used by all generations and for individuals with different physical or cognitive capabilities) can build accessible communities and promote cross-generational interaction (Burgalassi and Matsumoto, 2024[14]).
With the right approach and with place-based, people-centred, and forward-looking policies (as further developed below), regions facing demographic change can still sustain high levels of well-being.
6. Population decline will be challenging to reverse in most places; thus, policies should adapt to demographic realities while considering targeted mitigation where feasible
There are four main “ideal-types” of approaches that policy makers use to respond to population shrinkage (OECD, 2022[29]) (ESPON, 2020[30]):
1. Trivialising: policy makers maintain the status quo, do not consider demographic shrinkage projection data, and/or offer no response.
2. Mitigating or countering: policy makers acknowledge demographic shrinkage but mainly implement a counter-strategy aimed at mitigating the trend by attracting new residents and firms to stimulate population growth.
3. Adapting, managing or “coping with decline”: policy makers accept the inevitability of continued shrinking and manage its consequences by adapting public services and infrastructure, ensuring the quality of life of residents that decide to stay.
4. Utilising: policy makers see shrinking cities and regions as societal laboratories to test new methods, based on the assumption that a municipality’s quality of life does not necessarily depend on population density.
Traditional policy responses to population decline in OECD regions and cities have primarily focused on mitigation strategies, including increasing birth rates, and providing incentives to attract new residents and firms. However, with population decline already underway in 7 OECD countries, it has become clear that mitigation approaches alone will not be successful everywhere. In response, many countries and regions – including Korea, Portugal, Germany, and Japan (e.g. National Grand Design 2050 of Japan) (OECD, 2016[31]), have also started to shift towards the implementation of adaptation strategies. This approach acknowledges demographic decline as an ongoing reality and focuses on adjusting policies and public investment accordingly. However, this does not mean that mitigation should be entirely abandoned. On the contrary, mitigation efforts can complement adaptation strategies by enhancing the attractiveness of regions and cities despite demographic decline.
The adaptation approach, also referred to as “smart shrinking” or “smart adaptation”, acknowledges the reality of population shrinkage and seeks ways to adjust to its consequences (see point 4) (OECD, 2022[29]). This approach prioritises well-being and is based on the principle that population decline does not necessarily lead to lower quality of life or lesser potential of a place. It requires accurate information on the cost implications of delivering services in the present and the future (OECD/EC-JRC, 2021[16]) to ensure both cost efficiency and adequate access to services in all territories. The approach must also include innovative solutions and investments in digital technology and the digital skills of public practitioners and citizens to ensure the continued provision of essential services and the sustainable maintenance of vital infrastructures. Policy makers should also aim to create “age-friendly places” by adopting policies to help integrate all age groups into their communities.
Adaptation efforts can be supplemented by mitigation measures, with both approaches working in tandem to enhance well-being and regional resilience. By identifying their unique assets and challenges, regions and cities can implement target policies and investments to boost their attractiveness to people and investments promoting economic development (e.g. through smart specialisation strategies). These efforts can also provide residents with a compelling “reason to stay”, contributing to population retention. Key levers for improving regions’ capacity to attract and retain people include access to high-speed broadband, affordable housing, and education and training programs that are tailored to the needs of the local labor market (OECD, 2023[32]). Therefore, in some remote rural areas in the Nordic countries adaptation strategies are implemented alongside policies designed to increase regional appeal, including by investing in their comparative advantages, such as close co-operation between employers and education providers, as well as their natural and cultural capital (OECD, 2023[33]) (Kull et al., 2020[34]). Similarly, policies implemented by different regions across the OECD to attract skilled health professionals such as nurses to ageing communities, demonstrate a combined approach of mitigation and adaptation. Policies that enhance the attractiveness of small and medium-sized cities can contribute to balanced and connected urban systems.
Effective demographic policy requires assessing what is appropriate in each context. In some regions, a focus on adaptation will deliver better outcomes. In others, selective mitigation strategies can support resilience and retention. This approach can help reframe the narrative around population decline – not as an inevitable, linear shrinkage, nor as a crisis to be reversed – but as a manageable challenge that can also open opportunities. This shift can encourage a proactive, forward-thinking approach, making it easier to implement robust mechanisms for dialogue between public authorities and citizens ensuring transparency and inclusivity and increasing trust. It can also facilitate the prioritisation of vulnerable population groups, such as students, women, or the elderly, whose needs may be disproportionately affected by demographic changes.
7. Place-based policies to address demographic challenges should be done at the right territorial scale
The different patterns of shrinkage emerging across OECD territories as well as their different socioeconomic and geographic contexts call for tailor-made place-based interventions. These should be sensitive to how specific regions and localities are affected by population change but also to the tools available for adapting to its consequences. This approach enables policy initiatives to be tailored to current and future demographic realities.
A place-based approach requires targeting an appropriate territorial scale. Taking into account functional areas as a complement of administrative boundaries of subnational governments, not only in urban but also rural contexts, can reflect the potential economic, social and environmental connections across territories. This approach helps devise more coherent policies for rural areas and describe with better accuracy rural places and their diversity.
Using functional areas can also contribute to improve the targeting of funding. In EU countries, for example, many depopulating rural areas encounter difficulties in accessing to Cohesion Policy funding because they lie within NUTS 2 regions that have GDP per capita indicators reflecting the performance of cities and towns (ESPON, 2020[30]). Therefore, adjusting European funding allocation to consider demographic factors at the municipal level, rather than relying solely on NUTS 2 or NUTS3 administrative boundaries, could help ensure that resources are directed towards areas most in need, increasing the overall efficiency of these policies and funds. Functional areas allow all types of interdependence between and within regions. Demographic challenges play out differently across territories in terms of planning. For instance, while rural areas might focus on the risk of school closures due to the declining number of students, urban areas will need to adjust the housing stock, the physical infrastructure, and the digital infrastructure, to ensure public services are accessible to an increasingly large share of the old-age population. Maximising the integration of urban and rural areas and their synergies, through increased co-operation, can help achieving economies of scale in service delivery and contribute to develop new opportunities. Previous OECD research has highlighted the role of urban-rural partnerships in improving access to high-quality education, healthcare and social assistance, which are largely concentrated in cities, while a lack of co-operation within functional areas might conduct to competition among local governments to retain population, with a loss of welfare (OECD, 2022[25]).
Trends of urban shrinkage can start from a specific neighbourhoods and resulting in out-migration, urban decay and in-migration of marginalised households (Haase et al., 2014[24]), leading to spatial segregation at the city-level, with consequent risks for people in falling into social exclusion. Similarly, ageing can affect parts of a city differently, with particular challenges. For instance, within FUAs, ageing is faster in suburban areas than inner cities (Burgalassi and Matsumoto, 2024[14]; OECD, 2015[35]). Within-city segregation trends call for targeted policies to reduce disparities in well-being and to ensure equal access to public services and urban amenities in all neighbourhoods (OECD, 2019[36]).
Demographic change also calls for spatial planning and land use responses that take into account demographic projections and socioeconomic contexts. For example, strong, lasting depopulation entails risks of increasing vacant housing and higher infrastructure maintenance costs, which may lead to deteriorating built-environment quality over long stretches of time. Partly empty buildings and poorly maintained infrastructure, in turn, may detract from pleasant living environments and contribute to depress house prices. This may disproportionately affect poorer households who remain in depopulating regions, further aggravating socioeconomic disparities.
Policy makers should favour densification and renovation in neighbourhoods that are close to public services and transport to adapt to population decline and improve the living environment. Data on housing vacancies and geospatial analyses of accessibility can assist local authorities in spatial planning, land use, and infrastructure-related decisions. In case of strong, lasting depopulation, demolition projects could aim to reduce vacant housing, improve land use efficiency, and reduce infrastructure delivery costs. Spatial and land use policies also need to integrate local environmental opportunities and challenges, such as the potential for biodiversity protection and carbon sinks, as well as vulnerability to climate hazards.
8. Integrated planning and multi-level governance mechanisms should be at the core of policy responses to address demographic challenges
The effects of shrinkage are multi-sectoral, concern multiple levels of government as well as other stakeholders (see point 4). To overcome the additional difficulties of providing services and infrastructure in depopulating areas, multi-level governance systems and fiscal frameworks should be designed following the five primary components of the SHIFT approach:
1. Strategically planning for shrinkage. Strategic planning can promote the design and implementation of coherent policy actions across different sectors and levels of government able to address demographic decline and ageing. At both national and regional levels, strategies should consider local needs and capacities, and identify which sectors and economic activities have the greatest potential to succeed in depopulating places. While it is often difficult to determine specific successful activities in advance, strengthening basic capacities, including improving the business climate and firm-related services, is critical. They need to set out a clear, long-term vision to be integrated into the objectives of all policies in multiple sectors, including public transport, housing, social and health services, land use, and spatial planning.
2. Harnessing vertical and horizontal co-ordination. To ensure policy coherence across sectors and levels of government, vertical co-ordination arrangements can help identify and prioritise investment opportunities across levels of government, potentially resulting in an integration of policies and delivering goods and services in the most efficient manner. This can take place through committees, platforms and other communication channels among national ministries and subnational governments. On the other hand, horizontal co-ordination is particularly helpful in depopulating areas to make the most of economies of scale, as inter-regional or inter-municipal co-ordination can lead to the integration of policies through management arrangements that ensures lower costs and swifter service provision.
3. Innovating governance arrangements and fiscal instruments. Amidst a shrinking regional population, implementing innovative governance arrangements can help achieve economies of scale and maintain the quality of service and infrastructure provision. This can involve a strategic reallocation of competences to provide goods and services at a higher level of government, often asymmetrically to lift the burden of smaller municipalities. It can also take the shape of co-operation, be it among regions, municipalities or within a functional area designed for the provision of specific services or infrastructure, in which case a new governance structure may emerge.
4. Facilitating stakeholder engagement at all stages of policy-making. It is precisely when population shrinkage occurs that the remaining population should be heard and participate actively in policy-making. Participatory governance mechanisms as well as participatory budgeting can provide important knowledge on local needs to policy makers and can foster a sense of ownership of critical policy solutions to adapt to shrinkage, increasing trust in government. Citizens can also engage in organising and providing certain services collectively.
5. Training and retaining staff with the needed skills for effective multi-level governance systems. Public administrations in depopulating regions often face a scarcity of staff with the necessary skills to adapt to shrinkage – as well as the resources, including digital tools, to implement and sustain regional development strategies to adapt to shrinkage. Capacities required range from strategic planning, to budgeting, data management or procurement. It is crucial to offer public servants in depopulating regions the trainings required for skill development, and to retain them post-training by offering monetary and non-monetary incentives related to the nature of the job, career opportunities, and the quality of life offered in the region (OECD, 2023[37]).
9. Funding and financing schemes should aim to deliver fiscal stability and viability in depopulating regions and cities over the long-term
Demographic change can put significant pressure on subnational finances, creating a need to “do more with less”. Fewer people of working age, a higher proportion of older people and of less-educated low-income households, leads to a "scissors effect" in which revenues decrease while expenditures remain stable or increase. Transfers from national to subnational governments, especially in decentralised models, may also decrease, as they are often based on population. All these factors result in a vicious circle in which lower revenue and funding can lead to poorer quality service delivery, under-utilised and abandoned infrastructure, and thus less private investment and economic opportunities, which exacerbates the impact of shrinking. On the expenditure side, higher demand for certain services, such as healthcare, linked to ageing, translates into higher per capita expenditure. Without substantial structural changes, the cost of maintaining and operating many essential infrastructures barely varies because fixed costs are high, which puts great pressure on public finances. These financial challenges can lead to deficits and spending cuts, impacting on the long-term stability of public finances, service delivery and infrastructure maintenance.
Financial incentives have been put in place across several OECD depopulating regions and cities to attract new population and retain existing population. Examples include Japan’s Hometown Return programme, which offered housing subsidies and family support in rural prefectures, and Spain’s Castilla-La Mancha region, where the 2021 Law on Economic, Social, and Tax Measures introduced tax breaks for residents and businesses in depopulated areas. In some cases, these incentives succeeded in attracting population flows from other territories. Although this policy can be regarded as a localised success, it can lead to zero-sum dynamics if all regions implement the same measures. Moreover, in situations of overall shrinking population, attracting population to one region may create challenges in other depopulating regions. Therefore, these financial incentives cannot resolve the issue at the scale of a country. Such efforts should hence be focused to target threshold population size or population density in areas to deliver services that can be more sustainable over the medium and long term. More generally, governments should adapt service provision to different territorial realities based on reliable estimates of costs and access arising from demographic and geographic differences (OECD/EC-JRC, 2021[16]). Adapting to changes in demand following lower fertility rates and ageing implies that certain services will need to become more widely available, while others will have to concentrate more. This requires a consensual decision by policy makers and local stakeholders on whether to relocate certain services and in which settlements it is most promising to invest.
Although aligning funding with regional development policy objectives is acknowledged as desirable, most countries have yet to fully integrate these priorities into their budgetary processes. This is especially true for capital budgeting frameworks, where stronger links to infrastructure investment decisions are still needed to ensure consistency with regional development goals. This can help to meet regional development needs in a cost-effective, co-ordinated, and coherent manner. Policy makers can also enhance complementarity between sources of finance and fiscal instruments (e.g. tax regimes, transfers, equalisation mechanisms, regional development funds) in order to support more proactive and innovative approaches to regional development and to improve the design and planning of public investment.
10. Strategic foresight is paramount to better anticipate and prepare regions and cities for future settlement patterns
Demographic shrinking is a major megatrend affecting all levels of governments across most OECD countries (OECD, 2019[36]). Population changes, including strong and sustained declines, call for governments to bolster their ability to anticipate and prepare for its future impacts. Nevertheless, it is common for policy makers to resort to measures that prioritise immediate benefits when the effects of demographic decline become evident, often at the expense of long-term advantages. While targeted actions to palliate the consequences of demographic decline – such as failures in delivering key public services such as education or healthcare – are valuable, they should not detract from the crucial task of developing a long-term vision and a sustained, forward-looking strategy committed to adapting to shrinkage and acting as the foundation of all related policy initiatives.
To develop such a vision, strategic foresight is a critical tool to explore possible future changes and their implications for decision-making today (OECD, 2023[7]). However, in the demographic field, it requires available solid population projections and long-term demographic data series that cover and help determine a range of plausible scenarios. The OECD has collaborated with national and subnational governments to help them create future scenarios reflecting a wide range of possibilities that the future may hold in terms of demographic changes, extending from a status quo situation where most of the population remains concentrated in metropolitan areas, to a “rebound” of rural areas due to the high cost of living and difficult access to housing and cities, as well as remote teleworking opportunities (OECD, 2021[38]; OECD, 2023[7]). These exercises can encourage policy makers to invest time and resources in foresight practices to assess possible future scenarios and drive their policies strategically in line both with short- and long-term objectives.
Many OECD countries and regions are gradually incorporating foresight exercises as an integral part of dealing with and adapting to demographic shrinking. At the national level, Spain’s Foresight Office, España 2050, seeks to understand social, demographic, economic and environmental challenges, and opportunities that the country will face in the coming decades. The government held an initiative named “Dialogues on the Future” in which EU institutions and 72 other public institutions – including regional and local governments, foundations and universities – took part (Ministerio de la Presidencia, 2021[39]). In Finland, the national government submits to the parliament a “Report on the Future” during each electoral term, identifying issues that will require attention in the future, including demographic change. The Prime Minister’s Office is then responsible for co-ordinating the work to respond to these trends (Committee of the Regions, 2024[40]). At the regional level, the lack of financial or human resources to undertake can sometimes explain the absence of foresight exercises, but there are some successful examples at a subnational level. The region of Hauts-de-France (France) has developed a large, separate unit dedicated to foresight activities almost exclusively. In its documents, demographics features prominently as one of the important factors of change for the region in the long term (Agence Hauts-de-France, 2023[41]).
The following recommendations reflect the complexity of demographic challenges, but also the wide array of tools available to address them. They highlight how policy makers can move from reactive responses to proactive ones, tailoring responses that reflect the current and future demographic realities in different regions and cities with a forward-looking place-based approach. With strategic and long-term planning, demographic change can become an opportunity for more inclusive and sustainable development focused on people's well-being.
Recommendation 1. Acknowledge the demographic reality and anticipate change through evidence-based policy responses
Shrinking populations and ageing are a structural reality in many OECD countries. Seven OECD countries have already experienced population decline over the past two decades, and by 2060, this number is expected to rise to 14. Even in countries where national populations are projected to remain stable or grow, demographic change within countries is highly uneven, especially when comparing rural and remote regions with urban areas. This asymmetric reality highlights the need for place‑based policies rather than spatially-blind approaches that do not take into account the specific needs and trajectories of different territories. In some contexts, demographic trends intersect with diverse governance arrangements – including Indigenous governance systems – and with specific regional conditions, such as in remote areas where infrastructure gaps, limited access to services, and population mobility pose additional challenges
Given the scale and persistence of these trends, policy makers should move beyond short-term responses and acknowledge that, in many regions, shrinking populations and ageing are likely to continue. This requires a fundamental shift in how policies are designed and investments are prioritised – from a traditional focus on growth and expansion to one centred on resilience, quality of life, and inclusive prosperity. Rather than assuming growth will return, policies should focus on making places attractive, liveable, and efficient under new demographic realities. This means rethinking infrastructure investments, redesigning public services for lower-density places, leveraging digital tools to maintain access and efficiency, and supporting social innovation and community-based solutions. It also requires forward-looking governance: anticipating rather than reacting to demographic change. Strategic foresight – the use of scenario planning, trend analysis, and participatory visioning – can help identify emerging risks and opportunities, guide long-term decision-making, and ensure public services and infrastructure remain fit for purpose over time.
Integrate demographic trends into planning and investment frameworks
Demographic change should not be treated as a separate agenda, but rather integrated into broader regional development, infrastructure, and public service planning frameworks. Strategies should be based on realistic demographic projections and incorporate strategic foresight to test assumptions and assess future risks.
Long-term public investment strategies should explicitly integrate demographic analysis during their development. Developing and integrating robust, independently validated demographic trends and projections at the local and regional levels can help to identify how demographic change affects service and infrastructure needs across different territories and designing appropriate responses – from reorganisation and consolidation to repurposing or gradual downscaling – depending on the local context. Investments should support economic resilience and maintain access to essential services in regions experiencing depopulation or rapid ageing, while avoiding resource allocation to projects that risk resulting in underused or obsolete infrastructure.
In addition to targeted investments, policies should foster innovation, support collaborative networks and promote preventive approaches to mitigate the long-term negative impacts of demographic change whilst fully leveraging opportunities, for example through the silver economy. Investments should target sectors most affected by demographic trends – such as healthcare and long-term care – and on enabling solutions, such as digital connectivity, which can support service delivery, foster inclusion, and improve quality of life. These investments should be complemented by measures that strengthen local capacity, attract and retain people and adapt systems before pressures become critical. In remote or sparsely populated areas, particular attention should be paid to closing digital infrastructure gaps and improving climate-resilient service delivery models, which are essential for supporting quality of life and economic opportunity.
To support this, improved demographic and territorial indicators should guide investment decisions, ensuring alignment with actual and projected needs.
Adapt service delivery models to shifting population needs
Traditional delivery models tend to be based on the assumption of population growth or concentration. Shrinking and ageing regions require flexible, decentralised and often collaborative approaches, such as mobile units, shared services or digital platforms, to ensure access without compromising financial sustainability.
Governments should systematically estimate the variable cost of service delivery under different demographic scenarios. This enables more informed budgeting decisions and supports the long-term sustainability of public services.
Ensure fiscal predictability and inter-governmental co-ordination
In many countries, shrinking regions rely heavily on transfers from national or supranational sources (such as the European Union) to fund public services and infrastructure. It is essential to ensure predictable and stable fiscal frameworks to allow local and regional authorities to plan, invest, and deliver essential services over the long term.
Inter-governmental co-ordination should be strengthened to align national and subnational strategies around demographic objectives, reduce planning uncertainty, and address territorial inequalities.
Promote demographic literacy across policy sectors
Building awareness and understanding of demographic trends among decision-makers is essential at all levels of government. Governments should ensure that demographic data informs sectoral policies beyond population and planning departments. Strengthening data availability – including the development of forward-looking indicators – is essential for place-based decision-making.
Governments should institutionalise foresight as a governance tool by embedding scenario planning and participatory visioning into core planning cycles, and by supporting these efforts with dedicated foresight units, training programmes, and technical assistance.
Recommendation 2. Tailor adaptation and mitigation strategies to regional demographic realities
To address demographic change, traditional policy approaches have often focused primarily on mitigation – attempting to reverse or counter demographic decline through incentives to increase fertility or attract new residents. While such strategies can be effective in some cases, in other regions, for example those facing systemic, persistent and structural population decline, policy interventions designed to reverse decline are likely to be expensive and/or fall short. Moreover, in the short and long term that may only serve to accelerate decline in other vulnerable regions.
A growing number of OECD regions are moving towards adaptative approaches that acknowledge the realities of demographic change and seek to manage its impacts on service delivery, infrastructure, and community well-being. These strategies – sometimes called “smart adaptation” or “smart shrinkage” –emphasise the need to provide high-quality public services, maintain quality of life, and sustain regional vitality regardless of population size. In some regions, adaptation strategies will need to incorporate Indigenous governance systems, community-led planning processes, and local knowledge, ensuring that service delivery models reflect cultural relevance and the specific geographic and social conditions of the communities involved.
Yet, adaptation and mitigation are not mutually exclusive. Policies to boost well-being and access to economic opportunities can form a balanced and pragmatic response that can help regions build resilience, retain existing populations, and remain attractive to newcomers. The region of Norbotten in Sweden illustrates this integrated approach. Between 1990 and 2021, the region experienced the steepest population decline in Sweden (-5.6%), with rural areas most affected. In response, the region has innovatively adapted key services – for example, by introducing video healthcare consultations – to serve areas with lower population densities. At the same time, rather than aiming to fully reverse decline, the region has sought to strengthen resilience through a collaborative pilot policy focused on meeting labour demands linked to new investments. This example demonstrates that where conditions permit, selected mitigation efforts can complement adaptation – but that such strategies must be realistic, targeted, and aligned with demographic realities. (OECD, 2023[33]). Such initiatives not only address current demographic pressures but also contribute to a more constructive public narrative around demographic change – not as a crisis to be reversed at all costs, but as a challenge to be managed creatively, inclusively, and sustainably.
Adopt context-specific strategies based on demographic trajectories
Rather than applying adaptation and mitigation measures indiscriminately, policy makers should choose strategies based on the demographic trajectory, economic potential and institutional capacities of the region. In regions facing long-term structural decline, adaptation will be more viable and cost-effective. In other regions, where labour shortages and new investment are creating demand, targeted mitigation efforts may be appropriate.
Adaptation efforts should focus on ensuring continued access to essential public services, especially in areas facing persistent population decline. This includes healthcare, education, and transport services, supported by innovative solutions such as digital delivery or mobile service hubs.
Mitigation strategies should seek to enhance regional appeal by investing in local assets such as natural and cultural capital, affordable housing, and education and training systems.
Implement smart adaptation strategies to maintain well-being
Adaptation strategies should focus on ensuring quality of life despite population decline, including by right-sizing infrastructure, sustaining access to services, and improving housing quality.
Digital technology and innovation should be leveraged to support service delivery in sparsely populated areas. Investments in digital infrastructure and digital skills can ensure ongoing access to education, healthcare, and administrative services. AI-driven tools, particularly in healthcare and elderly care, can help extend service capacity by automating administrative tasks, supporting clinical decision-making, and enabling remote care – a critical asset for regions facing fiscal and workforce constraints due to ageing and depopulation.
Policy makers should also prioritise creating “age-friendly” environments to meet the needs of ageing populations, including accessible transport, housing, and community spaces.
Optimise service delivery networks in rural and shrinking areas
Policy makers should strengthen regional service centres – strategically located hubs that co-locate essential services such as healthcare, education, and digital access – to improve service accessibility and efficiency in shrinking areas. The location of these centres should be informed by geospatial analysis to ensure cost-effectiveness and proximity to population centres.
In the education sector, consolidating school networks across and in areas with declining enrolment can balance trade-offs between cost efficiencies, quality and accessibility, including in combination with targeted transport support, and digital learning solutions.
Stakeholder engagement in the planning and reorganisation of public service delivery should include transparent participatory processes, supported by ex-ante impact assessments, in order to build trust and support inter-municipal co-operation. These approaches should be aligned with the broader inter-municipal governance frameworks described in Recommendation 6.
Use mitigation to support regional resilience
While recognising that reversing demographic trend decline entirely is in many cases not feasible, targeted mitigation efforts can help strengthen the socio-economic base of shrinking regions, including to address skill gaps.
Local and regional governments should identify and invest in their comparative advantages through strategic planning tools such as smart specialisation strategies, with a focus on sectors with higher potential for talent retention.
In areas experiencing persistent population decline and labour shortages, such as in many rural areas, rural immigration programmes can support demographic resilience, especially when combined with community integration strategies and long-term settlement outcomes.
Efforts to attract and retain key professionals – for example, doctors, nurses, teachers, and care workers – should address common barriers such as housing availability, professional isolation and limited career development opportunities. These efforts should be tailored to local conditions and look to leverage on other factors, or comparative advantages, that can support attractiveness including those that support quality-of-life, such as access to green spaces, cultural amenities and community infrastructure.
Shrinking regions suffering from labour shortages, in particular, have opportunities to leverage the benefits of emerging technologies such as artificial intelligence (AI) to modernise traditional industries, attract new investments, and drive economic development.
Recommendation 3. Ensure policies are aligned with the right territorial scale
Responding effectively to demographic change requires two interlinked shifts. First, policies must become more place-based, taking into account local demographic, geographic and socio-economic conditions. In shrinking regions, this often implies moving beyond rigid jurisdictional frameworks and planning at functional scales – such as commuting zones or service catchment areas – to better reflect how people live, work and access services. This is especially important in shrinking and ageing regions, where aligning policies with functional realities can help avoid costly duplication of infrastructure, reduce per-capita service costs, and better target scarce resources. Functional approaches can enhance co-ordination in service delivery, infrastructure investment and governance efficiency across regions facing similar demographic pressures. Second, demographic change cuts across multiple sectors – including health, education, housing, labour markets, and transport – and addressing it requires cross-sectoral co-ordination. Many sectoral policies remain place-blind, shaped by national norms that overlook diverse local realities. A whole-of-government approach is essential to align strategies across policy domains and levels of government, ensuring that demographic adaptation efforts are coherent, place-based and responsive to both the scale and the distribution of change. In contexts of population ageing and decline, cross-sectoral co-ordination is also critical to avoid inefficiencies, service fragmentation, or gaps in provision that disproportionately affect smaller and more vulnerable communities.
Applying territorial and cross-sectoral lenses can help governments design integrated responses that better reflect the realities of demographic change on the ground.
Use functional areas to design and implement policies that respond to local demographic realities
Policy makers should move beyond administrative boundaries and consider functional areas – such as commuting zones, labour market areas, or service catchment areas – when designing policies to address demographic change.
Functional areas should be leveraged for more coherent planning for infrastructure, housing, education, and healthcare, as they often reflect the social and economic interdependencies between urban and rural regions better than administrative boundaries. This is particularly relevant in ageing and depopulating places, where functional planning can help sustain service delivery despite shrinking populations, and ensure investment is directed where it will have greatest impact. Sectoral policies (e.g. in education, healthcare, transport, and labour) should be adapted to the characteristics of functional areas using demographic, geographic, and socio-economic data, ensuring service models reflect local capacities and needs.
Address intra-regional demographic disparities through more differentiated policy responses
Demographic change should be analysed not only at the regional level but also within regions, identifying neighbourhoods or settlements – such as suburban or peripheral areas – that may be ageing more rapidly than city centres or experiencing out-migration and urban deterioration.
Policy makers should also design and implement targeted interventions that directly address intra-regional disparities. This involves using detailed spatial and socio-economic data to identify disadvantaged areas within regions and guide the allocation of resources. Targeted measures could include expanding rural transport links, deploying mobile service units, or supporting local job creation initiatives. These actions are particularly important in shrinking and ageing regions, where needs can differ significantly over short distances, and where smaller or remote communities may otherwise be left behind. Cross-sectoral co-ordination mechanisms – such as inter-ministerial fora or joint planning taskforces – can help align interventions and ensure that demographic insights shape decisions across relevant policy areas.
Ensure funding and investment mechanisms reflect demographic needs at the right scale
Funding frameworks, including those at the national and EU levels, should incorporate demographic criteria at a more granular level – such as municipalities or functional areas – rather than relying exclusively on broader administrative regions like TL2.
Policy makers should target funding more accurately towards communities most affected by demographic decline or ageing to improve the efficiency, equity and impact of public investment. This includes adapting intergovernmental fiscal transfers to reflect demographic realities, such as age dependency ratios, service delivery costs in low-density areas, and the fixed costs of infrastructure maintenance in shrinking municipalities. Introducing conditional elements to incentivise local adaptation efforts could also be considered.
Promote urban-rural co-operation to address shared demographic challenges
Policy makers should foster co-operation between urban and rural areas within functional regions to facilitate the shared use of services, infrastructure, and expertise, helping both areas adapt to demographic change.
Governments should support urban-rural partnerships that reduce inefficient competition between municipalities, create economies of scale, and enhance the delivery of key services such as education, healthcare, and social services.
Address disparities within cities and promote inclusive urban development
Within cities, policy makers should promote collection and analysis of granular neighbourhood-level data on demographic trends and prospects, in order to identity districts particularly affected by demographic decline or ageing (e.g. fast ageing suburban areas), and implement neighborhood-level interventions to revitalise underserved areas (e.g. diversify housing options), prevent spatial segregation and ensure equitable access to public services and infrastructure for all residents.
Recommendation 4. Adapting spatial planning and housing policy to demographic change
Spatial planning, land use, and housing policy can prevent and reverse negative effects of population decline and ageing on well-being and economic sustainability in OECD countries. In many shrinking regions and cities, outdated spatial plans and continued low-density development have contribute to sprawl, vacant housing, underused infrastructure, and increased per capita service delivery costs. These trends can result in deteriorating built environments, declining housing quality, and increasing socio-economic disparities, particularly for vulnerable populations who remain in depopulating areas.
Demographic change also alters housing needs – smaller and older households may require more accessible housing that is located close to services and renovated to meet energy and mobility standards. Shrinking populations challenge the financial viability of infrastructure maintenance and create incentives for more compact and efficient land use.
To ensure resilient and inclusive communities, spatial planning and housing policies must evolve to reflect demographic projections and diverse local contexts – from ageing neighbourhoods in cities to remote rural villages. Flexible and integrated spatial strategies can guide sustainable land use, promote regeneration, and improve infrastructure efficiency. Similarly, responsive housing policies – especially in rural areas – can support affordability, promote renovation, and foster social cohesion. These tools are essential for maintaining liveability, protecting environmental assets, and managing public resources more effectively.
Update spatial and land use planning to reflect demographic trends
Territorial and local planning frameworks should be revised to integrate up-to-date demographic data and long-term projections, with reference to foresight approaches in Recommendation 1. This includes aligning spatial plans with population trends to prevent inefficient land consumption and promote compact, regenerated settlements.
Local land use plans should enable flexible zoning that facilitates mixed-use development, densification, and adaptive repurposing of existing properties, especially in well-connected areas with access to services and transport.
Promote efficient land use and strategic redevelopment
Policy makers should prioritise compact, resource-efficient development in areas with existing infrastructure to reduce service delivery costs and environmental impact. In shrinking or ageing regions, this approach helps maintain service viability thresholds, reduces the risk of infrastructure abandonment and avoids the dispersion of limited financial resources.
Land-based financing tools should be leveraged – such as developer obligations, and density (building height) bonuses for affordable housing – by governments and planning authorities in contexts where market conditions allow, particularly in larger urban areas with strong demand and opportunities for private sector engagement. These tools can help regenerate underused areas, ensure developers internalise infrastructure costs, and support the provision of affordable housing in central locations. However, such instruments, like public-private partnerships (PPPs), may be less suitable for smaller or shrinking regions with weaker market dynamics. Land readjustment can also optimise spatial organisation and improve livability where applicable.
Vacant and underused properties should be addressed strategically, including through vacancy taxes, incentives to convert second homes, and targeted demolition. In shrinking areas, these tools can reduce health and safety risks and promote neighbourhood renewal – which support resident retention. Local governments can use these tools to reduce inefficiencies and enable mixed-use redevelopment.
Strengthen rural housing planning
Housing strategies in rural areas should reflect demographic realities, promoting renovation, reuse of vacant buildings, and inclusive models like multi-generational or co-operative living. Governments should support these efforts through financial and technical assistance.
Planning authorities should align housing approvals with labour and population trends, especially in areas affected by urban spillover, to prevent speculative overdevelopment and protect housing access for local residents.
Municipalities should be supported in managing rural housing stock through partnerships with the private sector and targeted rehabilitation. Compact development approaches should complement revitalisation and help sustain rural populations.
Integrate environmental sustainability and resilience into planning
Spatial and housing policies should also contribute to environmental goals by promoting land-efficient development, conserving green space, and integrating climate adaptation considerations. In ageing and shrinking communities, adaptation measures should focus on renovating underused or older buildings for energy efficiency and accessibility, rather than constructing new buildings.
Urban regeneration that prioritises compact development, energy-efficient buildings, and improved shared mobility options can reduce emissions and enhance the quality and accessibility of public spaces. In contexts of population decline, such strategies can also reduce the long-term operating costs of urban infrastructure and improve cost-effectiveness.
In the context of climate change, spatial planning responses to population change should consider how ageing and depopulation might increase vulnerabilities – for example, older populations may have greater difficulty evacuating from flood-prone areas or may suffer disproportionately during heatwaves. At the same time, spatial planning responses should also consider that some areas may present environmental opportunities for resource management, such as enhancing natural carbon sinks to support climate mitigation efforts.
Recommendation 5. Creating age-friendly places for resilient and inclusive communities
Older adults remain active contributors to their communities and local economies. Expanding opportunities for a growing share of older workers and fostering multi-generational workforces can boost economic resilience and productivity. In shrinking regions, age-friendly policies are particularly critical to maintaining quality of life and community vitality.
To ensure all places remain livable and inclusive, policies must adapt to ageing populations through integrated planning across healthcare, mobility, housing, education, and the built environment. Investments in accessible services, inclusive public spaces, and diverse mobility options can support active ageing, reduce social isolation, and help older adults remain engaged in their communities – regardless of where they live. These strategies complement broader service delivery reforms outlined in Recommendation 2.
Build capacity and resilience in community-based care
Health and care systems should attract and retain professionals through salary top-ups, relocation assistance, housing support, and service-obligation scholarships – particularly in underserved and shrinking areas. While these measures entail upfront costs, they can be cost-effective when considering the high economic and social costs of service gaps, preventable hospitalisations, and deteriorating well-being among older adults. Policies can further support mobility, recognition of qualifications, training in geriatrics and family medicine, and the provision of other non-monetary incentives – such as healthcare insurance or childcare benefits – which, while not direct income, still represent real costs to employers and public budgets. To be sustainable, such interventions should be supported by national and regional co-financing frameworks and evaluated against long-term outcomes in access, prevention, and quality of care.
Training pathways for care professionals should be expanded and adapted to local needs by integrating rural placements, hybrid learning, and partnerships with healthcare providers. Community-based care models – including home support, shared spaces, and day centres – can complement formal systems and ease pressure on institutional care.
Informal carers should be supported through structured training, financial compensation, and better integration into interdisciplinary teams – including doctors, nurses, social workers, and therapists – to enhance care quality and reduce caregiver strain. While these supports carry costs, they are often more sustainable than the alternative: expanding formal care systems to meet rising needs. Enabling informal carers can delay or reduce demand for institutional care, improve patient outcomes, and ease fiscal pressure on health and long-term care budgets over time.
Facilitating work-sharing and knowledge transfer across generations, by means of mentorship and other inter-generational programmes, can help recognise the contribution of older adults and help prepare for inter-generational turnover.
Develop skills and foster innovation in ageing-related sectors
Vocational and higher education institutions should expand training in elderly care, physiotherapy, and assistive technology using modular learning models. Curricula should include digital skills such as telemedicine and remote monitoring, developed in partnership with tech providers.
Lifelong learning opportunities must be accessible to rural professionals through micro-credentials, remote training options, and flexible upskilling pathways.
Innovation in the silver economy can be promoted by supporting ageing-focused start-ups and inter-generational mentorship programmes between older professionals and younger entrepreneurs.
Improve accessibility through transport and mobile services
Local and regional authorities should optimise rural mobility by expanding on-demand transport systems, improving co-ordination with regional transit, and enabling integrated ticketing and seamless transfers.
In cities, local authorities should invest in age-friendly infrastructure and accessible public transport networks by also enhancing walkability, upgrading transport infrastructure with universal design solutions. Particular attention should be given to underserved neighbourhoods and areas with ageing populations.
Mobile service delivery models should be scaled up – including pharmacies, groceries, banking, and public services – through public-private-community partnerships, especially in remote or low-density areas.
Create digitally inclusive and age-friendly environments
In ageing-related sectors, digital tools such as telehealth, AI-supported care, and assistive technology can extend workforce capacity and enhance care delivery. Governments should invest in broadband access and digital inclusion in underserved areas, while supporting community-led digital initiatives and inter-generational mentorship programmes.
Older adults should have access to free digital skills training delivered via libraries, senior centres, and helplines, while ensuring public services remain accessible both online and in-person.
Adapt housing, public spaces, and urban environments to an ageing society
Age-friendly housing models – such as co-operative and multi-generational living – should be promoted to encourage independent living and social cohesion. Public-private partnerships can deliver accessible, energy-efficient housing in areas facing affordability pressures.
Urban planning should address the spatial dynamics of ageing, especially in those areas where population ageing is faster. Public infrastructure, amenities, and green spaces must be safe, barrier-free, and welcoming for older adults.
In deteriorating neighbourhoods, urban regeneration should prioritise improving mobility and the creation of age-friendly public spaces to reduce isolation and support active ageing among older residents.
Recommendation 6. Strengthen co-ordination across sectors and levels of government
Demographic change is a multi-sectoral challenge that affects all levels of government and policy areas. Shrinking and ageing regions, in particular, face more difficulties in maintaining high-quality, cost-effective services and infrastructure due to reduced economies of scale and limited human and financial resources. These challenges are especially pronounced in low-density areas, where many municipalities are small and fragmented, with constrained capacity and overlapping responsibilities.
Addressing the consequences of demographic change calls for a holistic, cross-sectoral approach. National and subnational governments must move beyond siloed approaches and adopt integrated strategies based on a shared demographic diagnostic, reflecting both the scale and the spatial diversity of demographic trends. This calls for strong cross-sectoral and multi-level co-ordination, not just among ministries and agencies, but also across levels of government.
Multi-level governance mechanisms can play a crucial role in managing this complexity. A range of governance innovations, such as inter-municipal co-operation, rural-urban partnerships and participatory policy making, can contribute to aligning strategies across jurisdictions and sectors, thus ensuring coherence long-term planning and investment that is responsive to evolving demographic needs across sectors and diverse territorial contexts.
Establish cross-sectoral and integrated governance frameworks for demographic change
National, regional, and local governments should develop long-term demographic strategies that respond to the specific challenges of shrinking and ageing regions. These strategies should clearly define objectives, responsibilities, and funding at each level of government, and be co-ordinated to ensure alignment and coherence across sectors and territories. They should be based on demographic projections, spatially targeted, and integrated with sectoral policies such as healthcare, education, housing, and transport.
Where they do not already exist, co-ordinating bodies such as demographic committees or observatories should be established to ensure cross-sectoral coherence and support all levels of government with timely data and tools for the creation of policies sensitive to demographic realities.
Demographic impact assessments should be systematically conducted across sectors to ensure policies are place-based and responsive to long-term population trends.
Strengthen co-ordination among levels of government
Policy makers should reinforce vertical co-ordination by establishing dedicated inter-governmental bodies or working groups focused on demographic change, with clearly defined roles for national, regional, and local actors. This could include shared investment frameworks for ageing infrastructure, joint planning for health and education services, and regular policy dialogue to align demographic priorities across levels of government. Stronger co-ordination will help avoid fragmented responses and ensure more consistent implementation of long-term demographic strategies.
Inter-municipal co-operation should be formalised and expanded, especially in shrinking areas where pooling resources can improve service delivery and enhance strategic planning across administrative boundaries. Both voluntary and incentivised forms of co-operation can be effective, depending on local context. National and regional governments can support this by offering financial incentives, technical assistance, and legal frameworks that make collaboration more attractive and feasible – such as shared service agreements, joint planning instruments, or multi-municipal governance structures. In some cases, mandatory co-operation mechanisms may be needed to ensure basic service provision in areas with limited capacity.
Rural-urban linkages can be strengthened through dedicated partnerships for joint infrastructure development, integrated mobility systems, and co-ordinated economic strategies that promote territorial cohesion and equitable access to services.
Voluntary mergers of very small municipalities should be encouraged – where appropriate and based on an ex-ante feasibility study – through targeted financial incentives, technical assistance, and shared service platforms that improve administrative efficiency and long-term sustainability.
Enable inclusive and participatory governance
Participatory governance mechanisms in shrinking regions should be institutionalised by embedding citizen engagement throughout the entire policy cycle. This includes participatory planning and budgeting processes that involve residents – including youth and older adults –, civil society organisations, local businesses and, where they exist, diaspora communities in identifying service needs, setting investment priorities and co-designing solutions. Such approaches can enhance trust in public institutions, foster innovation in service delivery, and build long-term community ownership – particularly important in shrinking or ageing regions where engagement can help retain population and strengthen social cohesion. Governments can support this by providing tools, dialogue platforms and capacity-building to support inclusive local engagement.
Community-led initiatives should be supported as part of a broader inclusive governance approach. Volunteer networks, peer-to-peer services and citizen-managed facilities can help fill service gaps, strengthen social cohesion and retain population in shrinking or ageing regions.
Reinforce capacity in local public administration
Local governments should be equipped with training and resources in strategic planning, digital tools, budgeting, data analysis, and procurement to meet the demands of demographic change.
Retention of skilled staff should be promoted through competitive career paths, professional development, and non-financial incentives (e.g. affordable housing, environmental amenities) adapted to shrinking and remote areas.
National and regional authorities must provide technical assistance and platforms for knowledge exchange to strengthen local institutional resilience and peer learning.
Recommendation 7. Doing more with less: enhancing fiscal resilience in a changing demographic context
Population decline and ageing increase fiscal pressure on governments, especially at the subnational level. Shrinking populations reduce the size of the local tax base and strain the sustainability of revenue sources, while the costs of delivering essential services remain stable or even increase. This dual pressure – often referred to as the "scissors effect" – can undermine fiscal stability and the long-term viability of infrastructure, public services, and territorial cohesion.
In decentralised governance systems, population-based funding formulas and reduced local revenues can compound fiscal challenges. These dynamics risk reinforcing a negative cycle of underinvestment, service deterioration, and further out-migration, particularly in remote and sparsely populated areas. At the same time, growing demand for healthcare and social protection services, alongside high fixed costs for infrastructure maintenance, adds to expenditure burdens.
Addressing these challenges requires a shift toward more efficient, targeted, and innovative public service delivery. Policy makers must optimise existing resources, take preventive measures upstream, integrate service provision across sectors and territories, and align fiscal frameworks with demographic and territorial realities. This includes modernising financial instruments, fostering digital solutions, and strengthening institutional capacities for long-term planning and investment.
Enhance fiscal resilience through revenue diversification and better budget alignment
All regions should work to optimise property tax collection as a core source of local revenue. In shrinking regions, additional efforts may be needed to diversify and stabilise revenue streams – such as introducing or expanding context-specific fiscal instruments like vacancy taxes, tourism levies or environmental charges – to compensate for the decline in tax bases and to support service provision.
Policy makers should leverage AI-powered tax modelling and data analytics for more responsive and tailored fiscal planning, improving revenue forecasting, estimating tax potential and aligning budgets with evolving service needs. These AI-enabled tools can increase efficiency and better align spending with demographic realities.
Inter-governmental transfers and equalisation systems should be reconsidered to account for demographic pressures, especially the higher per capita cost of service provision in ageing and sparsely populated areas.
Make better use of limited financial resources through co-ordinated investment strategies
National and subnational governments should strengthen the alignment between regional development strategies and budgeting processes by integrating regional priorities into medium- and long-term budget planning, especially for capital investments. This could involve linking investment decisions to regional performance indicators, improving co-ordination between planning and finance departments, and using territorial impact assessments to guide funding allocations. Ensuring that budgetary decisions reflect place-based needs will improve the effectiveness and accountability of regional development policies.
Financial incentives to attract population should be used carefully. While they may help stabilise certain areas, overreliance on place-based subsidies can create zero-sum dynamics. Incentives should target areas where a minimum threshold of population and service sustainability can still be achieved.
Promote complementarity between fiscal tools, such as intergovernmental transfers, tax policy, regional funds, to support long-term territorial resilience and enable more proactive, needs-based investment planning.
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← 1. Metropolitan midsized regions are those TL3 regions where more than half of the population live in a FUA of at 250 000 to 1.5 million inhabitants. Metropolitan large regions are those TL3 regions where more than half of the population live in a FUA of at least 1.5 million inhabitants (OECD, 2023[7]).
← 2. In Japan, 94% of metropolitan areas below 500 000 inhabitants lost population between 2009 and 2018, while the share of shrinking cities above 500 000 inhabitants was 75%.