Place-based policies and the foundations of productivity in the private sector

This paper examines a broad range of place-based policies and their impact on productivity in the private sector and on other complementary outcomes. The analysis looks at how policies relate to different levels of heterogeneity of places, activities, firms and human capital. We discuss how the effectiveness of policies must factor in such heterogeneity. Given the increasing polarisation of regions both in the OECD and in the EU space, policies must deal with the inclusion of laggards, without stifling the dynamic potential of leaders. It is a complex balancing act. Policies favouring or governing agglomeration patterns in core regions are different from policies targeting technology transfer or FDI towards non-core regions. At the same time policies boosting the productivity of highly productive and fast growing firms are different from those favouring the inclusion of laggards, and also the type of activities, tradable or non-tradable services, manufacturing or R&D matter. Our bottom line is that the broad range of measures discussed can be effective, but only if they build on the inherent forces, the inherent competitiveness, the inherent comparative advantage of places. The impact is especially sizeable and sustainable if there are other factors interplaying with the policy, triggering a positive reaction of local actors. If there are no such factors, supporting policies are not cost effective. Even though policies may smooth patterns of exclusion, they cannot be universal, hence, they may also enact new patterns of exclusion that need to be analysed and addressed