Presentation made at the seminar "An Urban Agenda for Italy" held in l'Aquila, Italy on 28-29 May, 2014, by Paolo Veneri, Economist, Regional Development Policy Division, OECD. http://www.oecd.org/gov/regional-policy/

1. Towards a national urban agenda
for Italy:
Economic rationale and governance issues
from an international perspective
Paolo Veneri
Regional Development Policy Division
GOV OECD
L’Aquila, 28 May 2014

2. Outline
1. What is “urban”? Boundaries and influence of cities
2. The relevance of cities in the national economy: where
does Italy stand?
3. Making cities more productive: the role of size and
government fragmentation
4. Getting cities right: issues and approaches to
metropolitan governance

3. Cities are defined as “functional urban areas” (FUAs) composed by one or
more high-density cores and a connected low-density area.
FUAs are clusters of municipalities that represent an economic area
The OECD has identified 1177 functional
urban regions in 29 countries
1. What is “urban”?
In Italy:
4 large metro areas
7 metro areas
21 medium-size
42 small size
74 FUA s
51% of national
population
1,177 FUAs in 29 OECD countries
67% of OECD population

4. 1. Why the policy demands can be better
supported by a focus on functional urban areas?
1. Better understanding of functional (economic, social and
cultural) linkages within space. (e.g. account for externalities)
2. Better understanding – through international benchmarking
with “similar peers”- of individual cities’ performance and
potential.
3. Functional analysis of urban areas helps designing urban
governance solutions.
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5. 5
2. The relevance of cities in the national economies
In the OECD, proximity to urban centres positively affects the
performance of rural regions
Distance to the closest city and population growth in rural regions
Evidence from the OECD shows that:
 rural regions grow more the closest
they are to an urban centre
 rural regions benefit from growth
spillovers from urban regions

6. 2. The relevance of cities in the national economies
The weight of metro areas in the economy
Concentration of population, GDP and employment in metropolitan areas, 2010 (> 500k)
Italy
Source: Regions at a Glance 2013 - © OECD 2013

7. 2. The relevance of cities in the national economies
The contribution of metro areas to growth
% of national employment creation by
metropolitan areas 2000-12
% of national GDP growth contributed
by metropolitan areas 2000-10
Source: Regions at a Glance 2013 - © OECD 2013

8. 2. The relevance of cities in the national economies
The contribution of metro areas to innovation
% of patent application in metro areas
and the rest of the country
In the OECD 65% of all patent
applications were granted in
metropolitan areas.
However, Italy shows a much lower
share of patents granted by
metropolitan areas and also a lower
amount of patents application per
capita.
Source: Regions at a Glance 2013 - © OECD 2013

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3. Making cities more productive
Bigger cities have a productivity premium
Elaborations on OECD metropolitan database

10. • Functional Metropolitan Areas often consist of several
hundred municipalities
• => possibility of economic inefficiencies
– high costs of coordination
– certain policies taken at municipal level are likely to have negative
effects on other municipalities (that are not internalised)
• Fragmentation may lead to suboptimal outcomes
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3. Making cities more productive
The role of administrative fragmentation

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3. Making cities more productive
City productivity premia decreases with municipal fragmentation
OECD estimates indicate
that a twice higher
number of municipalities
per 100.000 inhabitants
is associated with 5-6%
lower productivity levels.
…Can specific metropolitan governance bodies help?

12. 4. Getting cities right: issues and approaches to
metropolitan governance
Share of metropolitan areas with a governance body (Results from an OECD survey, 2013)
Source: Ahrend et al. (2014)

13. 4. Getting cities right: issues and approaches to
metropolitan governance
Share of governance bodies active in selected fields
Source: Ahrend et al. (2014)

14. What a metropolitan governance can provide
• Production of public goods
• Achieve higher economies of scale (e.g. in service provision)
• Capacity building
• Account for negative externalities
Potential risks and bad outcomes
• Transaction costs / additional burden
• Risks of unbalanced distribution of benefits
among partners
• Risks of focusing on output rather than of
outcome and actual needs of territories
4. Getting cities right: issues and approaches to
metropolitan governance

15. • National policies affect urban development
 National legislation establishes the ground rules for cities.
 National governments intervene directly in a large number of
policy domains that affect cities – yet explicit national urban
policies are often narrowly conceived.
 Inter-municipal co-ordination needs support from above.
• Major domestic policy challenges require a multi-level approach:
 Neither cities nor national governments alone can address the
main competitiveness challenges.
 Environmental policies have a strong, place-based dimension,
especially in cities.
 Inclusive growth requires both economy-wide and local measures.
Policy coherence across levels of
government requires national leadership
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16. • Improve co-ordination of national-level policies that
affect urban development
• Increase the coherence between national and sub-
national/ city-level policies and correct perverse
incentives
• Provide levers to improve coordination across
municipalities within urban areas
The rationale of an urban agenda
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17. Thank you!