Revisiting place-based policymaking

September 2025

With the debate on EU policies post-2027 pointing towards a weakening of subnational levels and a lack of attention to territorial diversity, it may be worthwhile to revisit the concept of place-based policymaking.

This concept, closely associated with Fabrico Barca, is the subject of a recent OECD study entitled ‘Place-Based Policies for the Future (Si apre in una nuova finestra)’.

Why place matters

Spatial divergence has become a defining feature of economic and social development across Europe and the wider OECD. In many countries, the underperformance of certain regions is now the norm rather than the exception. Over the past 15 years, productivity in numerous subnational areas has stagnated or declined. By 2021, around one third of EU regions had still not regained their pre-2008 GDP per capita, and approximately 70% of people in OECD countries live in states where regional disparities are widening.

These developments contradict the idea that markets self-correct imbalances; indeed, the evidence suggests the opposite. Within-country mobility remains low — barely 3% of the population moves across regions each year — and migration is often selective, drawing away the young and skilled from places that can least afford to lose them. Firms cluster in large agglomerations, attracted by deep labour markets, dense supplier networks, and innovation spillovers. This further reinforces disparities. These dynamics can trap territories in what the OECD report calls 'low-level spatial equilibria': a cycle of weak productivity, shrinking tax bases and diminishing public services.

The costs of inaction are high. Beyond lost economic output, there are intergenerational consequences as opportunities disappear, fiscal burdens as struggling regions require financial support, and political tensions fuelled by geographical discontent. There are also environmental challenges that are harder to address where local capacity is weakest. Breaking out of these traps requires deliberate, place-sensitive intervention.

Place-based policymaking

The OECD report defines place-based policies as measures that are intentionally spatially-targeted and support places to improve their long-term economic performance and well-being. These policies are distinguished not only by their geographic targeting, but also by their ambition. Place-based policies seek transformation, not marginal adjustment.

Grounded in efficiency objectives, these policies aim to correct market and institutional failures. They are tailored to local conditions, have a cross-sectoral scope and are based on multi-level governance frameworks. Crucially, place-based policies can be applied to all types of territories — urban or rural, leading or lagging — though they often focus on areas with structural disadvantages or heightened vulnerability to shocks.

The OECD report distinguishes place-based policies from generic regional policies, decentralisation reforms, fiscal equalisation schemes and spatially tailored sectoral initiatives. A policy only qualifies as truly place-based when it combines spatial targeting with proactive support from higher levels of government, is integrated across sectors, and is oriented towards long-term transformation. This distinction is important in the current context of renewed interest in such strategies, fuelled by persistent inequalities, asymmetric shocks and the emergence of place-based industrial policy.

Those interested in delving deeper into the definition question can refer to the OECD report's annex, which contains a schematic comparison of place-based definitions from 13 different authors.

Designing effective place-based policies

The design quality of place-based policies is crucial. The OECD report identifies four conditions that underpin effective place-based policies:

• They must target local development potential, with objectives based on a clear diagnosis of market or institutional failures, as well as forward-looking assessments of territorial assets.

• They must ensure coherence by aligning across sectors and levels of governance to maximise synergies and avoid duplication.

• They must be implemented efficiently at the appropriate geographic scale with transparent and predictable funding, and with mechanisms in place to facilitate learning and adaptation over time.

• They must also reinforce multi-level governance by strengthening planning, coordination, leadership, and inclusive engagement.

Designers of place-based policies face trade-offs. Tailoring interventions to local contexts enhances their relevance, but this also increases complexity, particularly with regard to bringing together a wide range of sectoral and geographical interests. A recurring barrier is the insufficient administrative, fiscal and strategic capacity at the subnational level. Often, predictable long-term financing is also required to ensure structural change. Over-reliance on temporary, project-based funding can disrupt continuity.

Evidence from OECD countries shows that robust evaluations of place-based policymaking are rare. However, where they exist, roughly half report positive impacts on GDP or employment, with negative results being uncommon. In almost every case, strong design and competent delivery were the decisive factors.

Foresight in place-based policymaking

Foresight is not an optional extra; it is essential for making place-based policies resilient and future-proof. Today's systemic transitions — the move to climate neutrality, demographic change and digital transformation — are long-term, disruptive and unevenly distributed across space. Without the ability to anticipate, policy risks exacerbating existing inequalities or overlooking emerging opportunities.

The OECD report emphasises the importance of embedding foresight capacity in place-based policymaking. This involves developing forward-looking data and analytics, running policy labs and pilots to explore different transition pathways, and implementing temporary measures to trial solutions and garner public support.

Foresight also has a direct link to monitoring and evaluation. Forward-looking, place-based policymaking requires a granular indicator system that not only tracks GDP and jobs, but also well-being, environmental quality and so on — variables that can reveal the broader impacts of policy. In this model, foresight is the thread that ties diagnosis, design, implementation and adaptation together.

Governance and capacity as game changers

Ultimately, effective place-based policies rely on high-quality, anticipatory governance. By their nature, these policies cut across policy fields and administrative levels. Subnational governments already shoulder a significant proportion of public expenditure and investment relevant to economic development, infrastructure, innovation, and well-being. Without strong coordination mechanisms, however, these responsibilities can become fragmented and ineffective.

The OECD report therefore calls for strategic planning and coordination platforms that link the local, regional, national and European levels. Adequate and predictable funding is vital, as is investment in administrative, fiscal and strategic capacities. It is particularly important to build foresight and evidence-informed decision-making skills at the subnational level in order to navigate transitions.

Experimental governance methods, such as policy labs, piloting or participatory budgeting, can help to design and test solutions in real contexts. Similarly, engaging with civil society and the private sector is essential in order to secure legitimacy, mobilise additional resources and ensure that interventions align with local aspirations and realities.

Looking ahead

Scaling up place-based policies is both necessary and challenging. Systemic transitions such as decarbonisation, digitalisation and demographic change require action on a scale that matches the challenge. However, this must not come at the expense of place sensitivity. The risk of 'rolling out' standardised programmes in the name of efficiency is that they lose the very qualities that make them effective — and this applies even to place-based policymaking.

Therefore, the OECD report argues for the integration of policy learning into decision-making processes, i.e. a governance culture in which continuous monitoring, transparent evaluation and adaptive feedback are the norm. Clear, evidence-based communication is crucial for maintaining political legitimacy and public trust over the long timeframe that these transitions demand.

If Europe wants to reconcile cohesion with competitiveness in an era of transformation, place-based policies must evolve from an appealing idea to an operational reality. This requires a clear and forward-looking understanding of the strengths and challenges of each place, the integration of foresight into the design of interventions, and the development of governance systems that can deliver and adapt over time. This should also be taken into account when designing EU funds and regulations for 2028-2034.

The OECD report makes it clear that, when they are well designed, coherent, well governed and rigorously evaluated, place-based policies can help to transform spatial disparities into engines of renewal. For Europe, this is not just a question of fairness — it is also a matter of resilience, prosperity and navigating the transitions that are already reshaping our future.

by Kai Böhme

(Si apre in una nuova finestra)