Directorate for Public Governance

Productivity gap widening between frontier regions and the rest, says OECD


European Week of Regions and Cities, Brussels, 11 October 2016

The productivity gap between top performing regions and others in OECD countries has widened by almost 60% in two decades, according to a new OECD report. Having a majority of regions slipping behind the leaders creates a drag on national productivity levels.

The OECD Regional Outlook 2016 shows that the difference in labour productivity – a key driver of future prosperity – between the top 10% most productive regions and the bottom 75% grew from USD 15,200 to USD 24,000 between 1995 and 2013, as measured by average GDP per worker.

Assuming current trends, those regions slipping the furthest behind, which are home to one in four people in the OECD, would need to quadruple their productivity growth rates to catch up by 2050.

Rising regional inequality in recent years has been mirrored by growing disparities across cities and income inequality among people in most countries. Overall, while per capita income has converged across countries, a zoom inside reveals greater polarisation within many countries. 


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Since the mid-1990s, productivity growth has averaged 1.6% in the top performing regions, compared with 1.3% in the slowest-growing ones. This leaves an untapped growth potential that could be better mobilised.

Among regions that are catching up, a common factor is that a significant share of their economy is in sectors that are exposed to global competition, i.e. in manufactured goods, mining or services that can be traded internationally. This is particularly true for rural regions which cannot specialise mostly in market services, like cities can, and so need to remain competitive in traded activities. Rural development should involve much more than agriculture and could be better targeted and promoted, the report says. Otherwise, ageing trends could further lock rural regions into low productivity activities, like old-age care.

Better-designed investment policies at the local and regional level can help to boost productivity in the least performing regions. Economy-wide structural policies tend to affect different regions and cities in different ways and should therefore be complemented with regional policies. Attention should also be paid to how decentralisation and multi-level governance can be used to promote productivity in cities and regions.

The OECD’s third Regional Outlook was presented at the European Week of Regions and Cities in Brussels. Produced every two years, the reports look at regional, urban, and rural development policies, notably to guide public investment. They are based on subnational-level data accessible on the OECD Regional Database. (See more Regional Statistics.)

You can download the report here
, and 34 individual OECD country profiles here.


For further information or to speak to the report authors, please contact Karen Maguire,  Counsellor / Senior Project Manager, Regional Development and Innovation,  +33 6 74 76 43 74.


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