North East Devolution and Levelling Up

Devolution Can Boost Productivity, If …

Devolution is positively associated with productivity – and therefore economic growth – in functional urban areas, but only if linked to good quality institutions and limited fragmentation, new research has found. 

If these conditions are not met, devolution is negatively linked to urban labour productivity, according to the international research by the Organisation for Economic Cooperation and Development [1] presented at an online conference by the Centre for Cities. 

Fragmentation, where services like public transport, housing, economic development, place marketing and the provision of facilities such as sports stadia and shopping, are controlled by different authorities has a dampening effect on any benefits of devolution. 

The most productive urban areas tend to have high government quality, high decentralisation and low local fragmentation. In the UK, the quality of government measured by factors such as corruption and impartiality, is relatively high but centralisation is low. Good local institutions and limited fragmentation could make a difference. 

  • [1] A comprehensive approach to understanding urban productivity effects of local governments: Local autonomy, government quality and fragmentation. By Dylan Jong, Alexandra Tsvetkova, Alexander C .Lembcke and Rudiger Ahrend. Paris, OECD.