This chapter examines how demographic change affects multi-level governance frameworks, subnational finance systems, and service and infrastructure provision. It also introduces the SHIFT approach, outlining five elements to help subnational governments adapt to demographic shrinking, and discusses three common strategies for maintaining essential services and infrastructure for remaining residents in depopulating regions.
Shrinking Smartly and Sustainably
Strategies for Action
Abstract
This section reviews the main effects of strong and sustained demographic decline on multi-level governance frameworks and subnational finance systems, which in turn affect the ways and the extent to which services and infrastructure are provided.
Multi-level governance arrangements and territorial structures may become obsolete in depopulating regions and municipalities
Demographic change, and in particular shrinkage, can affect the effectiveness and representativeness of multi-level governance systems in a profound and multi-faceted way. As populations dwindle, there can be a notable reduction in the number of elected representatives and public staff at both the regional and local levels, leading to a loss in local governance and leadership. Civil society organisations, citizens, and local businesses may also lose steam, eroding the participatory nature of local governance structures as well as local democracy. In addition, demographic change may render existing institutional and territorial structures obsolete. In depopulating regions, these structures may no longer align with the demographic realities on the ground.
Figure 4.1 shows that countries that have not undertaken any territorial reforms have in general seen an increase in the number of smaller municipalities in terms of population size. With data from 13 OECD and EU countries, the number of municipalities with fewer than 2 000 inhabitants has grown on an unweighted average by 20% in a decade, with Poland, Bulgaria and Croatia registering the highest percentage increases (90%, 50% and 30%, respectively). The number of municipalities with 2 000 to 4 999 inhabitants has also risen by 9% on unweighted average, while the number of number of municipalities with 5 000 to 19 999 inhabitants has done so only moderately, at 4% on average. By contrast, the number of municipalities with more than 20 000 inhabitants has fallen on unweighted average by 5% over a decade, with the most significant decreases in Croatia and Lithuania, both by 14%. This indicates that demographic shrinking does indeed reduce the size of municipalities and increases the number of small local units, which may lead to inefficiencies in resource allocation, policy implementation, and decision-making.
Note: Countries without municipal mergers include 13 countries: Bulgaria (2012-2022), Croatia (2011-2021), Czechia (2013-2023), Denmark (2013-2023), Hungary (2011-2022), Japan (2010-2020), Lithuania (2011-2021), Poland (2010-2020), Portugal (2011-2021), Romania (2011-2021), Slovenia (2013-2023), Slovak Republic (2012-2022) and Sweden (2012-2022). Countries with municipal mergers over a decade include the following 15 ones: Austria (2011-2021), Belgium (2011-2021), Estonia (2011-2021), Finland (2012-2022), France (2011-2021), Germany (2011-2022), Greece (2001-2021)*, Italy (2011-2021), Korea (2010-2020), Latvia (2011-2021), Netherlands (2012-2022), Norway (2011-2021), Spain (2012-2022), United Kingdom (2011-2021) and United States (2010-2020).
*The dataset for Greece incorporates census data from the years 2001 and 2021, specifically selected to account for the extensive territorial reform implemented in 2010. Comparing data from 2021 with that from 2011—both years employing the updated territorial classification for municipalities—would mask the effects on municipal size of the comprehensive territorial reform.
On the other hand, countries in which territorial mergers have taken place among municipalities display the opposite trends, with the number of smaller municipalities having decreased over a decade (Figure 4.1). Territorial mergers may thus lie behind the 26% drop on unweighted average in the number of municipalities with fewer than 2 000 inhabitants or the 27% fall in the number of those with between 2 000 and 4 999. By contrast, the number of municipalities with over 20 000 inhabitants has increased by 14% on unweighted average over a decade.
Not all countries having undergone territorial reforms have done so to the same extent (Figure 4.2). Greece, Estonia, and Latvia have reduced the total number of municipalities by more than 60% over a decade, countries that have also witnessed a remarkable increase in the number of municipalities with over 20 000 inhabitants. In contrast, countries such as the Republic of Korea, Belgium or the United States have witnessed gradual but minor territorial mergers, with Spain standing out as the only country wherein there has been an increase in the number of municipalities. The data suggest that territorial mergers are effective in enlarging the population size of municipalities, even though these reforms may lead to varying rates of efficiency (Tavares, 2018[3]; OECD/UCLG, 2022[4]). However, territorial mergers can face opposition due to fear of losing access to services, the dilution of local identity as well as the reduction in local political power. This can result in an uneven adoption of voluntary territorial reforms within countries, with mergers not occurring where the national government may deem that they are most needed, as has been the case in Norway (Ruud, 2023[5]).
Note: The data comprises the total number of municipalities per country based on the same years mentioned in the note under Figure 4.1.
Demographic shrinking can put significant pressure on subnational finances and constrain public investment
Effective fiscal frameworks must provide the necessary conditions for the responsibilities of all levels of government to be properly funded and fulfilled. However, if a region’s population decline is strong and sustained over time, its public finances may be placed under stress and, unless the system is sufficiently flexible for adjustments, depopulating regions may fail to provide the necessary services and infrastructure for the well-being of their inhabitants.
Table 4.1 provides a stylised snapshot of the different fiscal effects expected on revenue, expenditure and debt indicators in regions that experience population decline in different intensities. In regions with mild population decline, revenue, expenditure and debt indicators are only marginally affected. Regarding revenue, while tax revenues as well as user fees may diminish slightly, equalisation transfers as well as the drop in variable costs of current expenditure may sufficiently cover for the marginal revenue losses. Regarding expenditure, regions depopulating only mildly may choose to start prioritising capital expenditure differently, undertaking upgrades to existing infrastructure before committing to new infrastructure investment, some of which may remain. As for debt, the capacity to service debt in the short to medium term is likely to remain relatively stable, with debt-to-GDP ratios not rising markedly.
Moderately depopulating regions start facing considerable fiscal challenges. On the revenue side, lower property values, consumer spending and smaller working-age population translates into a substantial drop in tax and non-tax revenue. For service fees such as public transportations, this may put at risk the recovery of service provision costs. Equalisation transfers become larger in order to bridge the gap left by lower revenues and lower formula-based transfers linked to population size. On the expenditure side, whereas costs variable with population size may be diminished, fixed per-capita costs continue to increase. Capital expenditure may largely be devoted to upgrading existing infrastructure or for new infrastructure investment seeking to spatially concentrate services in a specific place where services are most accessible to residents, thereby gaining scale. In terms of debt, the combination of rising operational expenditures and constrained revenue collection may jeopardise positive primary balances (i.e. total revenues minus non-interest expenditures). This may lead to an increase in the debt-to-GDP ratio, driven by diminishing economic outputs. Furthermore, it may also pressure debt service ratios closer to or below one, signalling fiscal distress in servicing debt, particularly over the long term.
Note: For the purposes of this table, “mild” population decline refers to regions experiencing a population decline rate of less than 0.5% per year over a five-year period, whereas “moderate” population decline refers to a population decline rate of between 0.5% and 1%, and “significant” population decline (also known as shrinking) refers to a population decline rate of 1% or more per year.
Source: Authors’ elaboration.
Finally, regions experiencing significant demographic decline can be expected to experience a more drastic fiscal impact. With higher vacancy rates, a substantial drop in consumer spending and the closure of local businesses, drops in tax and non-tax revenues are highly significant due to a smaller taxable base and a diminishing working-age cohorts relative to non-working-age people (Woodland, 2016[6]; European Commission, 2023[7]). Revenues from taxes such as personal income tax (PIT) as well as taxes on sales, motor vehicles or excises, and user charges on public services and other fees (e.g. construction licenses, administrative fines) will fall in depopulating regions. This may be particularly the case in decentralised countries whose subnational governments typically rely more heavily on tax. In addition, user charges revenue will be more exposed to falling income relative to regions in centralised countries where transfers play a larger role, especially if the latter are not fundamentally based on population. This is why equalisation transfers may become a basic pillar of fiscal health to ensure an adequate minimum standard of service provision.
Some countries experiencing shrinking in the OECD are already showing the signs of diminishing revenues. For example, Figure 4.3 Panel A shows that Spain’s provinces experiencing stronger population decline tend to show slower growth – or even decreases – in their PIT taxable base between 2013 and 2021. According to these data, for every 1% decrease in the population change rate between 2013 and 2021, there is an estimated 0.55% relative reduction in PIT base growth, compared to the baseline growth of 10% observed in provinces with no population change. Importantly, even provinces with stable population levels (i.e. zero population change) saw, on average, an 8.9% increase in their PIT base over the period. This suggests that demographic decline is associated with a lower growth in tax revenues, which does not necessarily result in a decline in absolute terms.
Note: Navarre and the provinces within the Basque Country are not included in the dataset since they operate under the foral fiscal regime instead of the ordinary one.
Source: (Agencia Tributaria, 2023[8]) and (OECD, 2024[9])
As for grants, Figure 4.3 Panel B shows that, rather than compensating for population decline, Spanish provinces experiencing population growth tended to receive greater increases in grants per capita. This may reflect demand-driven pressures in growing areas rather than a deliberate equalisation strategy in favour of depopulating ones. It does not appear, at least in this period, that national grants systematically offset the fiscal pressures associated with population decline.
As regards expenditure, fixed per-capita costs are significantly high and cannot be compensated merely with drops in variable costs. In part, this can be due to the fact that depopulating regions, whose remaining population tends to be ageing, require healthcare services that are particularly costly. For instance, Finnish municipalities, in charge of healthcare provision, spend more in per capita terms when they operate within a region that has witnessed population decline for at least a decade (Figure 4.4). It can also be due to the fact that the demanded skills are become scarcer and, therefore, more expensive (Hortas-Rico and Solé-Ollé, 2010[10]).
Source: (Sotkanet, 2021[11])
As a result of these fiscal pressures, depopulating regions suffer from a scissors effect – dwindling revenues at a time of increasing expenditures, thereby constraining their fiscal space. This usually entails limiting the amount of public investment into new infrastructure projects to focus on covering the costs of service provision as well as the costs of operating and maintaining existing infrastructure. When revenues are scarce, short-term infrastructure maintenance budgets are often one of the first items cut, which can lead to large maintenance backlogs and declining infrastructure quality that reduces the well-being of citizens and can put a drag on regional development efforts. Additionally, the under-utilisation, wear, and abandonment of existing infrastructure can pose safety hazards and further escalate maintenance costs. This is why governments may seek to downsize, decommission, or repurpose infrastructure in an attempt to lower operational fixed costs.
Table 4.2 provides a typology of the most typical infrastructure costs. New infrastructure has significant one-time investment costs related to the design and preparation, construction, replacement, or major upgrading, with sometimes incurring in decommissioning costs when a previous infrastructure must be demolished. In turn, all existing infrastructure face costs to ensure its correct operation, including costs for rent, personnel, training, ordinary and repair maintenance activities, utilities and support services, other consumables, user support, and IT and data management costs (depending on the infrastructure type).
Note: (*) New infrastructure refers to all investment costs except for end-of-life sub-costs when these relate to the demolition of infrastructure without re-building a renovated one.
Source: Authors’ elaboration, based on (ESFRI, 2019[12]; ISO, 2017[13]).
To correctly operate existing infrastructure, operating costs, which have both fixed and variable components, will need to be covered. With population growth, fixed costs may stay the same (e.g. rent, IT and data management) or may become variable (e.g. personnel, utilities, and support services). However, with population decline, a certain level of operating costs will always remain, thereby increasing per-capita costs of infrastructure in depopulating regions. For example, the rent costs for materials are unlikely to diminish with population decline. Ordinary and repair maintenance costs may become marginally smaller due to lower usage, but they will never decrease to the same extent as population decline. Therefore, adapting to shrinking involves making adjustments to ensure that operating costs of existing infrastructure remain cost-effective and do not put an overly large burden on subnational public finances.
The increasing intensity of the scissors effect in depopulating regions can reinforce a vicious circle: insufficient revenue leads to inadequate service provision or to expenditure cuts, which can jeopardise service quality and well-being and further promote out-migration and demographic decline. A persistent scissors effect can significantly impair the ability of depopulating regions to repay debt, heightening the risk for potential investors. This situation, characterised by notably higher debt-to-GDP ratios and debt service coverage ratios falling below one, may lead to deteriorating credit ratings as these are partly composed of Environmental, Social and Governance factors, which include demographic pressures (Collette, 2023[14]). As a result, depopulating regions are likely to find it increasingly difficult to secure financing for high-quality infrastructure (Carbonaro et al., 2018[15]).
To respond to demographic shrinkage and the resulting smaller units of governance, multi-level governance frameworks must adapt to incorporate or strengthen the following five areas: (1) strategically plan for demographic change, (2) harness horizontal and vertical co-ordination across and among levels of government, (3) innovate governance structures at new functional scales, (4) facilitate stakeholder engagement at all stages of policy-making, and (5) train and retain staff with the needed skills (Figure 4.).
Source: Author’s elaboration.
Strategically planning for population shrinkage
Responding to population shrinkage, particularly at the subnational level, is often challenging for three main reasons. First, the effects of demographic trends are asymmetric since they tend to affect subnational governments to different degrees within national boundaries. Second, population shrinking often affects multiple sectors and is thus addressed through multiple policies that should not have competing objectives. Finally, population shrinkage responses need to be aligned with and include the perspectives and actions of other stakeholders, such as the civil society, business, or academia.
Strategic planning (the process through which national and subnational governments set long-term territorial objectives and priorities, define the actions needed to progress and determine how success will be monitored and evaluated (OECD, 2023[16])) can be particularly beneficial for depopulating regions, helping to promote the design and implementation of coherent policy actions across different sectors and levels of government (OECD, 2022[17]). Conducting strategic planning can serve to co-develop with all relevant stakeholders a consensus-based, long-term strategy that sets out a clear vision to be integrated into the objectives of all policies in multiple sectors. This can give direction to local governments, and it can help subnational governments anticipate, adapt, and respond to demographic changes in a more coherent and efficient way (OECD, 2021[18]). With sufficient and appropriate resources to undertake it, strategic planning can also help to allocate budgetary resources strategically, prioritising actions that contribute to achieving a long-term vision and aware that demographic trends may reduce the fiscal space over time. Fiscal strategic planning can also help restructuring expenditures and revenues to prevent future escalations in the debt burden.
Although there are several techniques to develop a strategy for depopulating areas, strategic foresight techniques can help identify the different opportunities and challenges that megatrends such as demographic change pose for the future development and well-being of a region (Box 4.1). Having an estimation of future population trends can assist authorities in shifting from growth-oriented planning to better adapt infrastructure systems for depopulation (Sutradhar, Spearing and Derrible, 2024[19]).
Strategic foresight refers to the structured and systematic method to explore different plausible futures, the opportunities and challenges they could present, and using those ideas to make better decisions and act now. Foresight can support government policy making by (1) better anticipating changes that could emerge in the future, (2) revealing options for policy experimentation with innovative approaches, and (3) stress-testing existing or proposed strategies and policies.
In depopulating regions, strategic foresight can help governments better anticipate the socio-economic shifts related to population decline, such as changes in workforce dynamics, shifts in consumer behaviour, as well as evolving service and infrastructure needs. It can also be used to examine the consequences of demographic trends on subnational budgets, helping policy makers understand the evolution of their fiscal space in different demographic scenarios and assisting in the design of actions to adapt fiscal frameworks. Strategic foresight can also be used to identify innovative policy interventions, from reimagining service delivery models to fostering economic diversification and resilience. It can also support in testing current strategies against a spectrum of potential demographic futures, revealing vulnerabilities and prompting adjustments to enhance strategies to adapt to shrinkage.
Source: (OECD, 2023[20])
Strategic planning in the field of demographic change often also happens at the national level, resulting in the production of national integrated strategies. These strategies usually take the form of comprehensive plans that seek to address the effects of a megatrend such as climate change, poverty, inequality or demographic change. If undertaken in close co-operation with subnational governments and other stakeholders, these strategies can contribute to co-ordinating policies across various sectors and levels of government and ensure that they are properly and strategically funded. This is the case of Spain’s national integrated strategy España 2050, which examines the effects of the 10 key megatrends that the country will face by 2050 and proposes several measures to respond to them in a way that preserves the well-being of its citizens (Ministerio de la Presidencia, 2021[21]). As a result, strategic planning can produce efficiency gains by avoiding policy incoherences or duplications.
Harnessing vertical and horizontal co-ordination to adapt to shrinkage
OECD countries have experienced a general trend towards greater decentralisation over the past five decades (OECD, 2019[22]). As a result, subnational governments have acquired essential responsibilities and resources to fulfil them, sometimes asymmetrically among regions within the same country (Allain-Dupré, Chatry and Moisio, 2020[23]). As demographic shrinking gradually affects regions and municipalities in charge of delivering essential public services and infrastructure, efficiency rates and citizen engagement may decrease.
As regions and municipalities experience shrinking, effective co-ordination mechanisms – both vertical and horizontal – become key to ensure the efficient delivery of services and infrastructure. To address the multi-dimensional challenges of shrinking, vertical co-ordination (i.e. among levels of government) helps to identify and prioritise investment opportunities, strategically co-ordinate investments, and ensure that adequate resources and capacity are in place to undertake investments. This can include the co-ordination of capital budgeting across investment sectors discussed and reviewed by different line ministries, regions and municipalities. Another vertical co-ordination mechanism is spatial planning across different levels of government, particularly when it is informed by a strategic vision that accounts for all infrastructure delivered at the national, subnational governments and the private sector. In sum, vertical co-ordination can result in an integration of policies from the national (or even supranational in the case of EU Member states) to the local levels of government, wherein the capacity of subnational governments is critical for them to be meaningful partners (OECD, 2020[24]). This can prevent duplication and promote coherence across sectoral policies (e.g. education, healthcare, public transport, utility management). Vertical co‑ordination can take the shape of informal meetings among the relevant stakeholders, or they can be institutionalised in the form of conferences, platforms, or consultation committees, such as the Dutch Multi-Year Programme for Infrastructure, Spatial Planning and Transport, which acts as a Consultation Committee that discusses projects involving the physical domain and involves different ministries and regional actors to participate or launch MIRT programmes (OECD, 2023[25]).
In turn, horizontal co-ordination (i.e. among units within a level of government) is particularly important in depopulating areas to make the most of economies of scale. With inter-regional or inter-municipal co‑ordination, subnational governments may be able to access or provide goods and services more quickly and at a lower cost (OECD, 2019[22]; OECD, 2021[26]). The benefits of horizontal co-ordination can lead to the integration of policies through management arrangements and development plans among different sectors, services, and agencies within the regional or municipal level of government (OECD, 2021[27]).
Many OECD countries, especially those experiencing demographic decline, actively promote voluntary horizontal co-ordination, including rural-urban linkages. France, for instance, rewards municipalities that choose to co-operate with special grants and a favourable tax environment. Similarly, countries such as Estonia and Norway provide additional funding for joint public investments. Slovenia has seen inter-municipal co-operation increase substantially since 2005, when it introduced a financial incentive that covered 50% of the staff expenses for joint management bodies. In general, these financial incentives can mitigate the political costs associated with co-operation and ensuring the sustainability of partnerships or agreements, which often hinge on the political commitment of the regional or local government (OECD, 2023[28]). Partnership development models are also a major part of the European Commission’s regional development policy, particularly in rural areas, through the Community Led Local Development (CLLD), LEADER Local Actions Groups (LAG) and the Integrated Territorial Investments (ITI), among others.
Innovating governance structures and fiscal instruments
Regions facing demographic shrinkage are confronted with issues of size and scale. The challenge of maintaining essential services and infrastructure such as healthcare, education, and public transportation becomes more pronounced as the cost per capita rises due to declining population densities or increasing labour costs, a situation that affects regions to different extents.
Modifying the territorial boundaries of a region can serve as a tool to gain scale, although the effects on efficiency remain ambiguous and vary across countries (Tavares, 2018[3]). Amalgamating two or more regions or municipalities, thereby giving birth to a new politico-administrative, increases size and scale and can potentially enhance efficiency, but only under specific circumstances. For example, in Sweden the 1952 amalgamation reform triggered lower expenditure growth only in the case of the merger of highly fragmented municipalities of equal size but not when a large municipality amalgamated with a smaller one. On the contrary, municipal revenue growth was registered only in those municipalities that were small (2 000 inhabitants or fewer) prior to the reform (Hanes, 2015[29]). In Portugal, a reform diminishing the number of parishes led to efficiency gains in approximately 10% of municipalities but overall, the structural reform did not improve local spending efficiency in most parts of the country (Afonso and Venâncio, 2020[30]).
Amassing scale and using it to a region’s advantage can also be achieved by operating at the functional scale rather than solely within the administrative boundaries of a region or municipality. This can offer several benefits. First, it can promote efficiency both by allowing for a more targeted allocation of resources based on the actual needs and patterns of the population and by encouraging the concentration of services and infrastructure in a strategic location accessible to most target groups. Furthermore, operating at a functional scale encourages joint planning and collaborative decision-making processes with multiple municipalities or other administrative units through joint planning agreements, commissions, or organisations (OECD, 2024[31]). Lastly, by considering functional areas that reflect population distribution and mobility patterns, regions can ensure that services and infrastructure are accessible to all residents, regardless of their location within administrative boundaries, thereby promoting social inclusion and reducing disparities in access to essential services. An example of operating at a different functional scale is provided by Castilla y León (Spain). The region created 13 “Service and Spatial Planning Units” with the objective of encouraging co-operation in service provision. These units can lead to the creation of mancomunidades, an inter-municipal body that can be charged with co-ordinating the task of providing specific services across municipalities without constituting a new independent political entity (Junta de Castilla y León, 2023[32]; Junta de Castilla y León, 2018[33]).
New governance arrangements can be complemented with innovative fiscal instruments or adjustments to existing ones. Inter-governmental grants, in particular equalisation systems, can be designed in a way that considers both the population change and the effect of shrinkage on demographic composition. For instance, some countries, such as Sweden, have included a special indicator into expenditure equalisation formulas to consider and adapt to demographic trends (Värja, 2023[34]). Others, such as Korea, have established new funds (e.g. Local Revitalisation Fund) in an attempt to contribute to the adaptation efforts of depopulating regions. Other transfer systems take into account the age structure – for instance, by providing higher block grants for healthcare or social services to municipalities with a larger proportion of elderly residents. The more the grant system considers circumstantial and service need factors, the better it alleviates the impact of a declining population. However, equalisation transfers should not replace local or regional responsibility for building local capacities, forming strategies to adapt to shrinkage and improving inter-governmental co-operation (Wirth et al., 2016[35]). Sufficient resources should be allocated to fiscal strategic planning in order to manage the increasing financial burden. This is one of the priorities and recommendations by the federal government in Switzerland to cantons such as Grisons, whose age-related expenditure as a proportion of cantonal GDP is expected to increase substantially by 2050 (Colombier, 2023[36]).
Facilitating stakeholder engagement at all stages of policy-making
Engaging citizens in the response to demographic shrinking is as crucial as it is complicated in depopulating regions. This is due to, on one hand, the relative weakness of actors such as the government, business, or civil society organisations and, on the other hand, a less dynamic population, often with youth outmigration. Moreover, weak communication strategies by the governments or perceptions of participatory activities as a tick-the-box exercise also prevents the creation of a channel through which citizens and policy makers can establish a shared vision and co-create initiatives for service and infrastructure provision. As a result, demographic shrinking can create a void in regional and local governance and may lead to an erosion of shared identity within the community (Haase et al., 2012[37]; Syssner and Siebert, 2020[38]).
Far from being a burden for decision makers, stakeholder engagement can provide solutions in contexts of shrinkage. Governments and citizens have complementary resources which can jointly result in more effective and legitimate strategies to adapt to shrinkage. Consulting citizens can provide important knowledge on local problems and needs. For instance, by engaging with its citizens, the Government of Zeeland (Netherlands) found out that public transport was used almost exclusively during peak hours only. This prompted the government into promoting car pooling instead of expanding public transport lines – a much costlier alternative (Haase et al., 2012[37]). Furthermore, by drawing citizens into the policy process or the delivery of public services, citizens can be presented with more information related to the challenges policy makers may face, resulting in a better understanding of policy decisions and potentially an increased trust in government (OECD, 2022[39]). Finally, other benefits may stem from the promotion of a sense of community through the participation in these initiatives and increased social cohesion, potentially preventing some from out-migrating. Therefore, for these benefits to materialise, it is important that the participation of a wide variety of actors is promoted and expected in governmental strategies. This is the case of Italy’s Strategy for Inner Areas, an integrated strategy that involves governments, inter-municipal entities as well as citizens, civil society organisations and the private sector to “co-project” or actively participate in all phases of the strategy (Lucatelli, 2023[40]).
Stakeholder engagement can take a variety of shapes. One of the most well-known forms of stakeholder engagement is participatory budgeting. Citizens are generally asked to rank several policy areas or policies themselves in order of preference. The most voted areas are then allocated a line of budget to implement a project. Decision makers can also use these exercises inversely to ask which spending areas should be cut, as was the case in 2010 in Solingen (Cabannes and Lipietz, 2015[41]). New methods of collective ownership are another form of stakeholder engagement that can be found mostly in rural areas. In the United Kingdom, there are now over 250 community-owned village shops (Perry and Alcock, 2010[42]). Germany has created voluntary fire brigades and community-owned buses. With public transport in the German periphery almost gone, people in remote areas have created the “BürgerBus” system, which picks up the old-age population upon request and takes them on demand to a nearby city where they can access the services they may need (Haase et al., 2012[37]). Lastly, the LEADER approach, which aims to help communities in rural areas adapt to the changes affecting them – including depopulation, seeks to facilitate local engagement and empowerment through the Local Action Groups.
Acknowledging the critical role of stakeholder engagement, it is equally important to manage expectations, especially in regions or municipalities grappling with shrinkage. To maintain engagement and progressively enhance participation quality, governments should foster a culture of transparency about these limitations. Clearly communicating the process for considering community input and the realistic timelines for action can help align expectations. Additionally, highlighting incremental successes can keep the community engaged and informed, reinforcing the value of their continued involvement despite the challenges.
Training and retaining staff with the needed skills
Having sufficient and appropriate resources is key to achieve an effective multi-level governance system. Yet, depopulating regions face two main challenges in terms of staff provision. The first one is the relatively smaller pool of people available and willing to work within the region. This translates into a heavy workload for the remaining civil servants, which may encourage them to leave the region or the public sector. The second issue concerns the type of skills that the available pool of workers has, which may not match with the needs of these regions. The diversity of skills needed in government (from strategic planning, to budgeting, data management or procurement) makes it difficult to fill all vacancies.
As a result, strategies to respond and adapt to shrinkage should include measures to retain and train staff within the regional government administration, in co-operation with other levels of governance. Retaining workers implies boosting the attractiveness of a particular region. For example, affordable housing may be abundant in depopulating regions and green spaces may be bigger and pristine. It is crucial for subnational governments to preserve their green areas, promote cultural amenities and guarantee internet connectivity as this has been shown to drive talent attraction to regions across OECD countries (OECD, 2023[43]).
Furthermore, regional administrations should contribute to enhancing the skillsets of their in-house staff beyond their initial job descriptions. This can be achieved through targeted training programmes aimed at broadening employee expertise in diverse fields. Collaborative efforts with the national government and neighbouring regions can facilitate cost-effective joint training initiatives. For example, the region of Taurage (Lithuania) received substantial support, amounting to EUR 20 million over three years, to facilitate the development of a green public transport system. Part of those funds was dedicated to building the capacities of local governments to collaborate efficiently among each other rather than compete (Česonis, 2023[44]). Additionally, fostering internal mobility within the administration, including temporary assignments to different departments or levels of government, presents opportunities for skill development. It is imperative, however, to ensure that the investment in training yields lasting benefits by retaining skilled personnel within the region post-training.
Innovating service delivery in depopulating regions: collaboration, integration and technology to the multi-level governance frameworks and subnational finances may encourage governments to rethink how they can deliver essential services and infrastructure in depopulating areas in the most effective and efficient way. In this regard, there are three broad mechanisms through which governments can ensure service and infrastructure provision: (1) inter-regional or inter-municipal co-operation, (2) concentration of multi-service infrastructure, and (3) leveraging technology for mobile or on-demand services.
Inter-regional and inter-municipal co-operation is a valuable tool to address challenges faced by depopulating regions. By collaborating across jurisdictions, regional and local governments can pool resources and expertise to optimise the delivery of public services and infrastructure. Shared services agreements can enable regions and municipalities to maintain essential facilities such as schools, hospitals and employment centres more efficiently, mitigating the need for closures that exacerbate population decline. For instance, the municipalities of Lolland and Guldborgsund in Denmark have joined forces to deliver preparatory basic education and training in the Region of Zealand (Nordregio, 2021[45]). A similar case is that of the municipalities of the Päijat-Häme county (Finland), where its regional development unit has created a network of municipal educational directors which has set up a network-based comprehensive school system that aims to offer high-quality teaching services online to all children irrespective of their place of residence (Carlson, 2023[46]). In Iceland’s Westfjords, for instance, various municipalities unite efforts to deliver essential services such as healthcare, public transport, and cultural activities. To ensure accessibility, they have undertaken joint construction projects, such as the construction of the Bolungarvíkurgöng tunnel in Northern Westfjords, to ensure safe passage on roads (Nordregio, 2021[45]).
Co-operation can also take place across national borders. This is the case of six municipalities within the regions of Alentejo, Centro (Portugal) and Extremadura (Spain), which established a network through which they can share resources, experiences and strategies, with the ultimate goal of structuring catchment areas around these villages to offer complementary services (Simão, 2023[47]). Another example is the European Groupings of Territorial Co-operation (EGTC) of Hospital de la Cerdanya. The hospital, which opened in September 2014, is a successful example of the joint management of a health facility by two public health systems in neighbouring countries, located in a mountainous region characterised by remoteness and lack of basic services and infrastructures (ESPON, 2018[48]).
Another strategy to bolster the efficiency of service delivery involves consolidating multiple services within a shared area or facility. This can help manage the operating costs of infrastructure, which are inextricably intertwined with the scale of service provision. Analysing the drivers of major service and infrastructure costs and how service demands are distributed in the region can help identify optimal locations where services are easily accessed by a majority of individuals and help to determine what policy actions could provide value for money. This can lead to repurposing existing infrastructure or, where possible, transforming it into multiple-use facilities where different services are concentrated. A collaborative effort between the Bergö Island Council and the municipality of Malax in Finland exemplifies this approach through the establishment of a multi-functional service hub, Fyrgården (Nordregio, 2021[45]). This hub integrates supportive housing units tailored for the old-age population with an array of nearby amenities, including a public library and a local healthcare station operational once a week. In Groningen (Netherlands), multi-functional community centres have been set up as part of its Depopulation Agenda 2020-30, combining healthcare services with other commercial activities (van Wingerden and Sibbes, 2023[49]). In Italy, the POLIS project is currently repurposing the physical infrastructure of Poste Italiane’s postal services in depopulating areas, transforming its current offices into one-stop shops for postal and public administrative services as well as banking, energy solutions and even co-working space services, thereby reducing costs (CEB, 2023[50]).
Finally, technological innovation in service provision stands as a catalyst for efficiency gains and enhanced accessibility. The integration of mobile and on-demand services efficiently caters to the punctual needs of residents, eliminating the necessity for a fixed facility dedicated solely to those services. For example, the Fyrgården hub mentioned earlier offers adaptable, on-demand services such as mobile hairdressing and specialised medical care visits. Similarly, in France, the bébé bus serves as a mobile drop-in daycare centre, catering to the sporadic demands of working parents, while on-demand transportation and meal delivery services have been set up for the elderly (Intercommunalités de France, 2023[51]).
Although one of the three main mechanisms through which governments can provide services in depopulating areas may be prevalent, all of them can co-exist. Municipalities can co-operate precisely to consolidate services within an area, each covering a part of the costs. Moreover, the testing and establishment of more innovative solutions for service delivery can be undertaken by a group of regions or municipalities, and this can take place also across national borders. An example of this is the inter-regional co-operation between the Swedish region of Jämtland Härjedalen and the Norwegian county of Trøndelag, through which the VälTel’ Mixed Zone for Welfare Technology TestLab’ was implemented. This project created a cross-border innovation mixed zone that promoted research for developing, testing, and implementing welfare technology solutions, such as mobile health solutions, digitalisation of homes, and emergency support systems (Nordregio, 2021[45]).
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