Multi-level governance in OECD countries Highlights of recent trends, challenges ... ·...

Multi-level governance in OECD countries

Highlights of recent trends, challenges &

recommendations

Dorothée Allain-DupréHead of Unit, Decentralisation, Subnational Finance and Public InvestmentESG/CFEOECD

1. Context and challenges for

regional policy

22,5

23

23,5

24

24,5

25

25,5

26

26,5

27

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Capitals' average GPD share Capitals' median GPD share%

Across OECD regions, disparities in GDP per capita are larger within countries than across countries. Following the crisis, disparities across countries are rising again.

However, there is an increasing concentration of economic activity within OECD countries. Capital regions contribute more than 25% to the country GDP and their share is rising.

0,25

0,26

0,27

0,28

0,29

0,3

0,31

0,32

0,33

0,34

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Coefficient of variation

for GDP per capita

Average within country Across countries

OECD (forthcoming): Regions and cities at a Glance

1. Context & challenges for regional policy

In nearly half of OECD countries, the share of public investment to GDP has fallen relative to pre-crisis level.

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Percentage points difference in public investment between 2015 and the average over 2000-07

Note: For Korea, the last available year is 2014.Source: OECD (2017), Economic Policy Reforms 2017: Going for Growth, OECD Publishing, Paris,http://dx.doi.org/10.1787/growth-2017-en.


Public investment was particularly hit in Portugal

http://dx.doi.org/10.1787/growth-2017-en


95

105

115

125

135

145

155

165

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP Total Expenditure Direct Investment

Social Benefits Staff Expenditure Intermediate Consumption

0.3%

0.7%

1.3%

2.4%

1.7%

4.7%

∆ 2017

Changes in subnational government expenditure in the EU28 from 2000 to 2017

Changes in subnational government direct investment in the EU28 (2007-2017)

6

% Average annual change in real terms

IrelandGreece

SpainMaltaCyprus

CroatiaItaly

RomaniaPortugal

LatviaLithuania

HungaryNetherlands

SloveniaFrance

EU28EstoniaBulgaria

PolandCzech Republic

AustriaUnited Kingdom

GermanySlovakiaBelgium

FinlandDenmarkLuxembourg

Sweden

-17.0 -15.0 -13.0 -11.0 -9.0 -7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0 7.0



Poorly designed framework conditions at the national level

• Administrative burden and heavy procurement rules

• Fiscal relations across levels of government (lack of subnational fiscal autonomy, unbalanced decentralisation)

• Unclear assignment of responsibilities (infrastructure, economic development, spatial planning, education, health, etc.)

Lack of capacity

• Key bottleneck - often concentrated in the planning/design phase: how to design a balanced investment mix that addresses local needs?

Lack of sufficient in-house expertise to design infrastructure projects (56%)

Lack of capacity to design long-term public investment strategies (65% SNGs)

• Challenges on the financing side - private finance and financial instruments still little used by SNGs

• Performance monitoring - monitoring is frequently pursued s an administrative exercise and not used as a tool for planning and decision-making (66% of SNGs)

Coordination failures, lack of scale

• Across sectors (sectoral priorities dominate over integrated approaches)

• Across national & subnational governments (information asymmetries, lack of data on local needs) [vertical coordination]

• Across jurisdictions [horizontal coordination, risks of fragmentation] - Absence of a joint investment strategy with neighbouring cities/regions (76%)

Most common multi-level governance challenges affecting effective regional development

2. Trends in multi-level

governance in OECD countries

9

Subnational governments are key economic and policy actors

across the OECD

40%

63%59%

31%

20%

Greece IrelandChile

EstoniaChile

Canada

Canada

Canada

Canada Canada

12%

17%

42%

10%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Expenditure Staff Investment Tax revenue Debt*

OECD Minimum Maximum Portugal

% of general government - 2016

*: Debt OECD definition ie including, in addition to "financial debt", insurance reserves and other accounts payable.

2. Trends in multi-level governance in OECD countries

10


Degrees of decentralisation varies largely in OECD countries –

no “optimal” level

AUS

AUT

BEL

CAN

CHL

CZE

DNK

EST

FIN

FRA

DEU

GRC

HUN

ISL

IRL

ISR

ITA

JPN

KOR

LUX

MEX

NDL

NZL

NORPOL

PRT

SVK

SVN

ESP SWE

CHE

TUR

GBR

USA

OECD34

EU28

OECD25

OECD9

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Sub

nat

ion

al e

xpe

nd

itu

re a

s a

shar

e o

f to

tal

pu

blic

exp

en

dit

ure

(%

)

Subnational expenditure as a share of GDP (%)

Subnational government expenditure as a percentage of GDP and total public expenditure

Municipal population and area: great variations between OECD countries (2016)

11

13 km2

51 km2

271 km2

0 1.000 2.000 3.000 4.000 5.000 6.000

Czech RepublicSlovak Republic

FranceSwitzerland

LuxembourgHungary

GermanyItaly

AustriaEU28

BelgiumSpainIsrael

SloveniaNetherlands

PolandEstonia

JapanOCDE34

United StatesPortugal

GreeceDenmark

KoreaTurkey

United KingdomMexicoNorwayFinlandIceland

SwedenChile

IrelandCanada

New-ZealandAustralia

Average municipal area (km2)13614 km2

1 685

5 765

9 440

0 20.000 40.000 60.000 80.000 100.000 120.000

Czech RepublicFrance

Slovak RepublicHungary

SwitzerlandAustriaIceland

LuxembourgSpainEU28

EstoniaGermany

ItalyUnited States

CanadaOCDE34SloveniaNorwayPolandFinland

BelgiumIsrael

SwedenPortugal

GreeceAustralia

NetherlandsMexico

ChileTurkey

DenmarkNew-Zealand

JapanIrelandUnited…Korea

Average population per municipality )

222 130

164 755

148 695


6

6

8

16

11

13

13

16

6

5

4

4

0 5 10 15 20 25 30 35 40

Specific legal framework to foster co-operation across jurisdictions inmetropolitan functional areas

Governance arrangements tostrengthen urban-rural partnerships

Specific instruments to strengthen co-operation across other regions

(counties, provinces, states, etc.)

Specific incentives to foster co-operation across municipalities

Yes, before 2014 Yes, after 2014

Horizontally across jurisdictions, has your country developed or strengthened any of

the mechanisms listed below to co-ordinate public investment for regional development?

• 16 countries (out of 26 surveyed) have specific incentives to foster cooperation across municipalities

• Several OECD countries have recently enacted regulations to encourage horizontal collaboration (France, Portugal, Japan, among others).

• Co-ordination is generally designed on a voluntary basis and governments use incentives to promote it (Slovenia, Spain)

• OECD countries are also increasingly fostering co-operation across regions, provinces or states

• Co-operation has been particularly encouraged at the metropolitan level (France, Italy, UK, etc.)

Most countries have some forms of inter-municipal cooperation The number of metropolitan governance authorities increased



Metropolitan governance

0

5

10

15

20

25

30

35

40

45

50

1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 2001-2010

Source: OECD 2015

Number of metropolitan governance structures created or reformed in the OECD,

by decade

15 new metro structures created between 2011 and 2013

14

Scale-up in subnational governance

Regional Authority Index: of the 81 countries, 52 experienced a net increase in the degree of regional authority

0

5

10

15

20

25

30

35

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Average Regional Authority Index score

Europe

America

Asia

Source: Regional Authority Index in 81 countries (2016)


Regionalisation reforms in 81 countries of the world

15

Most responsibilities are shared among levels of government


Proportion of decisions where more than one government level is involved (%)

Source: OECD (2018) Fiscal Network Questionnaire on spending powers

Progress in vertical coordination

• 17 countries have formal platforms ofdialogue with SNGs

• Co-ordination platforms, in general, do nothave decision-making authority

• 13 countries use contracts across levels ofgovernment – effective tool for bothcoordination and capacity building

• Co-financing arrangements as well asplatforms for regular inter-governmentaldialogue are two of the most populargovernance instruments used by OECDcountries to co-ordinate interests vertically(Australia, Luxembourg, Sweden, amongothers)

1

10

16

14

18

16

21

2

13

13

14

17

22

18

4

1

2

1

0

1

0 10 20 30 40 50

Other

Regional development agencies design andimplement programmes under the…

Formalised agreements among levels ofgovernment (e.g. contracts, partnerships,…

Formal consultation of subnationalgovernments when developing national…

Regular inter-governmental dialogue

Regional developmentstrategies/programmes aligned with the…

Co-financing arrangements among levels ofgovernment (e.g., matching grants)

Yes, before 2014 Yes, after 2014

Across national and subnational governments, has your country developed or strengthened any of the mechanisms listed below to co-ordinate public investment for regional development?


Implementation of the OECD Principles on Effective Public Investment across Levels of Government

The majority of reforms implemented bycountries are linked with Pillar 1 and 2

A majority of countries report recent reforms onintegrated investment strategies, vertical co-ordination, result-oriented investments andtransparency and strategic use of publicprocurement (Principles 1, 2, 8 and 11)

More than half of countries have implementedreforms on horizontal co-ordination, mobilisationof private actors and financing institutions,reinforcement of public official’s expertise andsound and transparent financial management.(Principles 3, 6, 7 and 10)

Fewer countries have conducted reforms onupfront assessment, engagement withstakeholders, sound and adapted fiscalframework and regulatory systems (Principle 4, 5,9 and 12)

Has your country reformed existing policies/programmes/initiatives or adopted new policies/programmes in line with one or several

of the 12 Principles of the Recommendation?

1920

14

10

13

1615

18

11

14

18

10

0

2

4

6

8

10

12

14

16

18

20

22

24

26

Principle1

Principle2

Principle3

Principle4

Principle5

Principle6

Principle7

Principle8

Principle9

Principle10

Principle11

Principle12


3. Challenges & Lessons for

policy makers

Cross cutting lessons for practitioners

3. Lessons for policy makers: making MLG systems

work

1. What works there might not work here

2. Capacities first

3. Keep it simple

4. It is the quality of the relationship that counts

5. Ownership matters

6. Be aware of biases (e.g. risk aversion)

7. Get the incentives right

8. Keep trying and testing

9. Begin with the goal in mind

• Strengthening capacities is a long-term agenda• Capacity building should not be restricted to training or technical assistance: also

institutional and financial capacities• Better assessment of subnational governance challenges - use a differentiated

approach • Importance of “repeated games” - Maintain stability of rules and regulations over a

long term • A key corollary is also that governments should limit excessively complex

administrative procedures and constant changes in the rules. Keep the system simple (e.g. number of conditionalities, performance indicators)

• Simplicity comes with the need for greater flexibility that allows adapting programmes to local circumstances and development needs.

• What works there might not work here. Indeed, SNGs differ greatly on degree of autonomy, types of responsibilities, aggregate productive capacity, institutional capacities, etc.

(1) Capacities first – the need for simplicity, stability, and flexibility


work

(2) It is the quality of the relationship that matters

PITFALLS TO AVOID POTENTIAL SOLUTIONS● Undervalue dialogue and co-operation

tools

● Focus on formal arrangements without taking care of their real effectiveness and motivation of actors

● Ignore that developing strong, trusting, and cooperative relationships is a virtuous circle that starts with practice

● Underestimate the role of informal dialogues and social networks that favour cooperative relations

● Some mutually dependent conditions that can facilitate an effective dialogue: simplicity of information and feedback, transparency, of rules; transversal engagement, credibility, ownership

● Use formal instruments (like contracts) to build trust between parties

● Avoid unilateral decisions without consultation

● Find the right balance between top-down and bottom-up approaches


work

Source: OECD (2018) Rethinking Regional Development Policy-Making

22

• Administrative fragmentation is correlated with lower city productivity - and higher spatial segregation

• Determining optimal subnational unit size is a context-specific task; it varies not only by region or country, but by policy area, as well. The efficient size differs between waste disposal, schools or hospitals.

In general the optimal range for efficient public service provision appears to be between 20 000 and 250 000 people but this is a vast range.

• Cooperation does not happen spontaneously – incentives are needed

• Metropolitan governance is more widespread across the OECD – but fiscal responsibilities of metro areas tend to remain very limited + risks of duplication (in countries with 3 tiers)

• Regionalisation reforms - increase the need for coordination across government tiers and the need for clarification in the assignment of responsibilities, to avoid overlap

(3) Addressing scale issues is critical


work

Source: OECD (forthcoming) Making Decentralisation Work: a Handbook for Policy-Makers

Engaging in a decentralisation reform should be conceived and pursued as part of a broader strategy of territorial development and broader public governance reforms.

It should not be seen in isolation.

It is also a "never-ending" reform: there should be regular reviews and adjustment/fine-tuning

Ten guidelines for implementing decentralisation, which apply both to federal and unitary countries

Detailed sets of recommendations, checklists with self assessment questions

23

(4) Decentralisation is a means – not an end in and by itself


work


24

Making Decentralisation Work: 10 Guidelines for policy-makers

1. Clarify the responsibilities assigned to different government levels

2. Ensure that all responsibilities are sufficiently funded

3. Strengthen subnational fiscal autonomy to enhance accountability

4. Support subnational capacity building

5. Build adequate coordination mechanisms across levels of government

6. Support cross-jurisdictional cooperation

7. Strengthen innovative and experimental governance, and promote citizens’ engagement

8. Allow and make the most of asymmetric decentralisation arrangements

9. Consistently improve transparency, enhance data collection and strengthen performance monitoring

10. Strengthen fiscal equalisation systems and national regional development policies to reduce territorial disparities


work


Decentralisation, public investment and subnational finance UnitESG/CFE http://www.oecd.org/cfe/regional-policy/multi-levelgovernance.htm

OECD Council Recommendationon effective public investmentacross levels of government

Subnationalgovernments in OECD

countries: key data(annual edition)

Rethinking Regional DevelopmentPolicy Making

Multi-level governance studies

For more information

http://www.oecd.org/cfe/regional-policy/multi-levelgovernance.htm

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