Regional development

OECD Territorial Reviews: Competitive Cities in the Global Economy


Part I: Chapter 1 | Chapter 2 | Chapter 3 | Part II | Quotes
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ISBN Number: 9264027092
Publication Date: 
November 2006
Pages: 446
Number of tables: 22
Number of graphs: 49


OECD Territorial Reviews: Competitive Cities in the Global Economy

Cities are home to more than half the people living in OECD countries and almost 50 % of the output and jobs of many nations is found in their largest city. Though most cities have higher economic growth, foreign investment and labour productivity than the rest of the country, they are also more polluted, crime-ridden and socially disparate. A new OECD report, Competitive Cities in the Global Economy gives case studies and policy recommendations to help cities, often the drivers of national economies, continue to thrive. The book also provides a strong statistical database on the world’s principal cities.

The report studies the 78 largest metro-regions in the OECD, ranging from Tokyo with close to 35 million inhabitants to Auckland with about 1.5 million. The OECD average is just over 5 million. Of the 25 wealthiest cities, as measured by GDP per capita, 22 are in the United States and the others are London (in 13th place), Paris (18th) and Dublin (23rd).

Successful cities attract talented young highly-skilled workers, are centres of innovation and entrepreneurship and are competitive locations for global and regional headquarters. The proximity of universities to research and production facilities means cities are where new products are developed and commercialised. More than 80% of patents are filed in cities.

However, cities are not always synonymous with success. Cities can falter. Berlin, Fukuoka, Lille, Naples, and Pittsburgh perform below the national average for income, productivity, skills, and employment. And there is some evidence that mega-size cities – those more than 7 million people such as Seoul, Mexico City, Istanbul and Tokyo – have outgrown the economies of scale normally associated with cities.

Competitive Cities in a Global Economy argues that there is no ‘one size fits all’ policy for cities. But the report makes recommendations that can be tailored to meet specific needs. These include:

  • A flexible strategic vision is necessary to foster competitiveness, ensure a diversified range interdependent ventures, and information and transportation links between universities, researchers, technicians, and manufacturers.
  • Liveable cities with high-quality infrastructure, green spaces, and inner city residential areas and public projects can contribute to economic success, attracting foreign investors as well as highly qualified professionals and tourists.
  • Effective governance of cities depends on leadership from the national government to encourage reform, a formal government at the metro-regional level, and lower level local networks that include non-governmental actors, associations and businesses which can deal with social tensions and understand market realities.
  • To balance the financial needs of cities with those of the rest of the country, cities can diversify tax revenues with ‘smart taxes’ such as congestion charges and use public-private partnerships to raise money for public projects. Equalisation payments between metropolitan regions can be effective but national equalisation schemes to redistribute resources from richer to poorer regions sometimes disregard the higher spending needs of cities and act as a disincentive to poorer regions to increase tax revenues.

The report is divided into two parts:

Part I. Competitive Cities in the Global Economy: Horizontal synthesis report. This part includes the horizontal research based on findings from a number of case studies on metropolitan regions and on national urban policies across OECD countries (OECD Territorial Reviews) as well as from the OECD metropolitan database.

Part II. Proceedings from Conferences and Workshops on City Competitiveness. This part compiles the best experts’ papers provided during the series of conferences and workshops organized over the period 2004-2006 around the main theme of city competitiveness.

Part I – Competitive Cities in the Global Economy

Chapter 1 The Emerging Role of Metropolitan regions

This chapter provides an in-depth analysis of socio-economic trends and challenges faced by the largest OECD metropolitan areas based on the unique international database produced by the OECD on 78 metro-regions with more than 1.5 million inhabitants and more.  The acceleration of urbanisation has strengthened the weight of large cities, or metropolitan regions which tend to concentrate an important part of their national economic activities. For instance, Budapest, Seoul, Copenhagen, Dublin, Helsinki, Randstad-Holland and Brussels concentrate nearly half of their national GDP whilst Oslo, Auckland, Prague, London, Stockholm, Tokyo, and Paris account for around one third. Most OECD metro-regions have a higher GDP per capita than their national average (66 out of 78 metro-regions), a higher labour productivity level (65 out of 78 metro-regions) and many of them tend to have faster growth rates than their countries.

Cities benefit from advantages such as more diversified economic base with higher specialisation in productive activities, a strong innovative capacity (more than 81% of OECD patents are filed by applicants located in urban regions), and a higher level of skills.

There is a positive correlation between metro-regions’ size and income, especially when they concentrate over 20% of national GDP but this correlation becomes negative at around 6-7 million, suggesting diseconomies of agglomeration due to congestion and other related costs.

The growth capacity of metro-regions should not be overestimated as metro-regions are not always synonymous with success. A number of metro-regions lag behind national average, such as Berlin (Germany), Fukuoka (Japan), Lille (France), Naples (Italy) and Pittsburgh (US) and metro-regions still concentrate large and persistent pockets of unemployment (one third of the 78 metro-regions have above national average unemployment rates). Exclusion and poverty in most OECD countries have become urban phenomena, with immigrants as a particularly vulnerable portion of the metro-regions' population. Spatial polarisation is increasing but deprived neighbourhoods often have lower access to public infrastructure and services, and feature lower level of investment per capita than other richer neighbourhoods.          


Chapter 2 Competitiveness, Liveability and Strategic Vision

The combination of economic advantages and difficulties posed by the rise of metro-regions present a number of strategic choices or dilemmas that confront policymakers.

  • Dilemma I. Positive or negative spillovers? Are metro-regions the causes of economic growth or its consequence? If the former, they need to be encouraged; if the latter, does their tendency to attract resources away from other regions do more overall harm than good?
  • Dilemma II. Which public strategic vision in a market context? A strategic vision is required to pursuit competitiveness of metro-regions. But can public authorities do this without attempting direct substantive economic planning which cannot work in a dynamic, changing economy?
  • Dilemma III. Economic dynamism or liveable city? Concentration of population, which partly account for metro-region’s dynamism, causes also congestion, poor environment, housing shortages and the formation of ghettos. Is there a choice between economic dynamism and having a liveable city?

Chapter 3 The Governance of Metro-regions

Metropolitan governance emerges as a key issue for managing urban growth and for the implementation of policy actions and strategies in pursuing competitiveness objectives.

  • Dilemma IV. Appropriate scale or closeness to citizens? The need for strategic visions and overall infrastructural planning in metro-regions, suggests some need for a relatively autonomous public authority at the appropriate geographical level. But this level will be remote from many citizens’ local concerns. How can these tensions be balanced?
  • Dilemma V. Metro-regions versus central/state government? Autonomous public authority at the metro-regional level may seek devolved powers priorities whilst the higher levels of government (central or state government in federal countries) still want to maintain control on large cities. Where is the balance between these to be found?
  • Dilemma VI. Participation of private sector actors in metro-regions' governance? Public authorities must involve the private sector in constructing regional partnerships for economic development. But can this avoid improper lobbying and a squeezing out of small and medium-sized enterprises by large corporations?
  • Dilemma VII. Unequal burdens or distorting subsidies? The large spending needs of metro-regions create major fiscal challenges. At the same time, national goals – such as a demand for regional equity - might force metro-regions to contribute financially to the rest of the country.  How can the right balance be found?

Part II – Proceedings from Conferences and Workshops on City Competitiveness

Part II derives from papers presented at a series of conferences and workshops on city competitiveness organised by the OECD Public Governance and Territorial Development Directorate: “City Competitiveness” (Santa Cruz de Tenerife, Spain, 3-4 March 2005), “Cities attractiveness” (Nagoya, Japan, 2-3 June 2005), “Competitive cities and social cohesion”, (Montreal, Canada, 13-14 October 2005) and “The Fiscal Challenges of Metropolitan Areas: The Perspective of the Central Government” (1 June 2004, OECD headquarters).

  • Mainsprings of the Creative City: Lessons for Policy-makers Allen J. Scott, Distinguished Professor, Department of Geography and Department of Public Policy, University of California, Los Angeles, USA
  • Globalisation and Urban Competitiveness: Challenges for Different Types of Urban Regions Willem Van Winden, Erasmus School of Economics European Institute for Comparative Urban Research Erasmus University, Rotterdam
  • Specialisation and Networking in Medium-sized Cities Colin Crouch, Chair of Institute of Governance and Public Management, University of Warwick Business School, UK
  • The Impact of Tertiary Education on Urban Development Helen Lawton Smith,  Managing Director, Oxfordshire Economic Observatory and Reader in Management, Birkbeck, University of London, UK
  • Policies to Enhance City Attractiveness: Achievements and New Challenges Eiji Torisu
    Head of Division, Regional Policies for Sustainable Development, OECD
  • The Connections Between Social Cohesion and City Competitiveness Ivan Turok, Director of Research, Department of Urban Studies, University of Glasgow, UK
  • Labour Market Integration Policies to Enhance Social Cohesion Ian Gordon, Professor of Human Geography, London School of Economics and Political Science, UK
  • Can Distressed Urban Areas Become Growth Poles? Claude Jacquier, Senior researcher, CNRS (National Center for Scientific Research), France
  • Cohesion and Competitiveness: Business Leadership for Regional Growth and Social Equity Manuel Pastor, University of California, Santa Cruz, USA
  • Governance for Metropolitan Sustainability Tony Travers, Director of the Greater London Group, London School of Economics
  • Local Public Finance: Issues for Metropolitan Regions Howard Chernick,  Professor of Economics, Hunter College and the Graduate Center, City University of New York, USA, and Andrew Reschovsky, Robert M. La Follette School of Public Affairs, University of Wisconsin-Madison, USA

“This is a 'must read' publication, not only for those who already believe in the key importance of urban policy, but even more so for those who remain to be convinced.” 

Alberto Ruiz-Gallardón, Mayor of Madrid, Spain


"The most comprehensive examination of the territorial dimension underlying economic growth today."

Saskia Sassen, author of Territory, Authority, Rights: From Medieval to Global Assemblages
(Princeton University Press 2006).


"With the nation-state and the corporation seen as the world’s two competing economic and social units, the regional economy is often overlooked. It’s refreshing to see such detailed attention paid to its role as the real motor force of international growth.”

Richard Florida, author of The Flight of the Creative Class.


“This report on cities demonstrates that economic prosperity and social well-being are inseparable.”

Jean-Louis Borloo, Minister of Labour, Social Cohesion and Housing, France.


"A striking report that will force governments to reconsider their urban agenda".

Dr. Giulio Santagata, Minister of Government's Programmes, Italy.


"This report provides invaluable advice for policy makers as our cities grapple with profound change."

David Crane, Columnist on Global Issues, The Toronto Star

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