Across the OECD, the globalisation of trade and economic activity increasingly tests the ability of regional economies to adapt and exploit or maintain their competitive edge. On the one hand, there is a tendency for performance gaps to widen between and within regions, and the cost of maintaining cohesion is increasing. On the other hand, rapid technological change, the extension of markets and the greater use of knowledge offer new opportunities for local and regional development. This requires further investment in the business environment, reorganisation of labour and production, and upgrading skills and environmental improvements. All of these trends are leading public authorities to reconsider their strategies. The role of policies aimed at improving the competitiveness of regions by promoting the valorisation and use of endogenous resources has been strengthened.

Chapter 1 summarises the trends of regional development policies in OECD member countries, beginning with problem recognition (the problems or challenges recognised by the country) and the objectives of regional development policies, followed by an overview of the legal and institutional framework including major policy tools, the urban/rural policy framework and the budget system. Finally, institutional aspects such as multi-level governance and horizontal governance are presented. The analysis suggests an important role for regional policies in shaping sustainable endogenous development, notably the need for well-developed governance mechanisms capable of better responding to the diverse opportunities and demands of different regions in order to improve policy efficiency.

The following challenges necessitated regional policy at EU level: economic and social disparities across member countries and their regions; the need to increase solidarity and competitiveness and promote growth and employment; and responses to new challenges such as globalisation, climate change and ageing.

Cross-border regions come to the fore under increasingly globalised markets. Their peripheral and remote location from the national centre has tended to leave these regions under-developed. Legal and institutional factors have erected barriers to the smooth flow of people and goods across borders in order to protect domestic (mainly security) interests. However, with increasing pressure for free trade and integrated markets, borders are now increasingly being redefined as bridges or communication channels, rather than barriers. This brings new economic opportunities for cross-border regions.

The OECD has studied urban-rural linkages from a broad perspective (OECD, 2009a). In this report, the focus is on the spatial and fiscal inter-dependence of urban areas and their neighbouring rural regions, especially on how to control urban growth in the process of urban sprawl. In general, rapid urbanisation has required governments to deal with the short-term impacts of land development and the accompanying economic growth over long-term economic, environmental and social interests, but unplanned urban growth poses short- and long-term challenges to economic growth and sustainability.