The Contribution of Regions to Aggregate Growth in the OECD

This article investigates the contribution of regions to aggregate growth. We find a great degree of heterogeneity in the performance of Territorial Level 3 ( TL3 ) regions of the OECD (Organization for Economic Cooperation and Development). The regional contributions to aggregate growth follow a power law, with a coefficient around 1.2 (in absolute terms). This implies that Few‐Large ( FL ) regions contribute disproportionately to aggregate growth whereas Many‐Small ( MS ) individual regions contribute only marginally. Because the large number of these smaller regions and the decay of their contribution to growth is slow (generating a fat tail distribution), their cumulated contribution is actually around two‐thirds of aggregate growth.