Sharing ideas to reduce territorial inequality: The case of Argentina

In Argentina, income and opportunities have become increasingly concentrated in just a few cities. This pushes some people to move to a location different to their place of birth in order to find better access to job opportunities and good-quality public services, including education.

As we explored in a previous post, concentration can have some benefits, such as improving living conditions, reducing overall poverty, learning between companies, and connecting employees and firms. But often, these benefits are confined to specific cities and regions, resulting in territorial inequalities. So, how can countries like Argentina promote economic growth and benefit from concentration, while improving living standards and opportunities across all territories?  The answer is by implementing a Territorial Development approach in public policy.

Over the course of two years, we worked with the Government of Argentina on two key steps to apply such an approach. First, we conducted an assessment of territorial inequalities in the country and then, we proposed a pathway on how to move from a diagnosis to a strategy that addresses those inequalities.

Through the assessment, we found that:

• The situation in Argentina - with population and economic activity concentrating in few places (mainly in Buenos Aires) - does not differ from global trends. But despite this concentration, there are few companies relative to the country’s population size, and most of these firms are local and small, staying small for several years or eventually closing. This suggests a lack of scale and overall low firm density.
• Services dominate GDP and employment, and there is high contribution of non-tradeables to employment in Argentina. Employment specialization at the regional and city level is weak and becoming weaker overtime, suggesting connectivity challenges in the country.
• Last but not least, Argentina has seen some convergence in living standards, but important gaps remain. For example, while access to water has converged over the years, important gaps remain between the northern region and the rest of the country  in terms of access to sewage and secondary education. Moreover, the regions with high levels of poverty are also less effectively equipping their populations with the skills for productive work.

While the diagnosis is clear, the challenge now is how to move toward a strategy that addresses territorial disparities to ensure that opportunities reach all corners of a country and all citizens no matter where they are born.

We proposed that the government implement a national vision putting forward a comprehensive Territorial Development Program. Some key aspects the program should consider, include:

1. Clarify roles at each level of government and develop mechanisms that can enable coordination between sectors and territories.
2. Ensure that there is adequate capacity and financial resources to manage and execute responsibilities at various levels. Define indicators and make them available through information platforms to help policymakers make informed decisions, measure progress and impact, and come up with strategies that address local needs.
3. Design incentive mechanisms, for example through a program of grants or transfers linked to the indicators, which can help create capacities while making headway on planning and implementation of transformational changes at the local level.
4. Consider differentiated engagements with provinces based on local needs.

The path for the development of such a program could start through a pilot in a few provinces, thus providing the government an opportunity to learn by doing.

With the national government embracing its role as enabler, provincial and local governments can then be at the center of design and implementation of a second generation of territorial development instruments to ensure that opportunities reach Argentineans everywhere throughout the country.