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State of the Nordic Region 2016


This report is the fourteenth volume in the series “Regional Development in the Nordic countries”. The report draws on the latest available statistics to present an analysis of demographic changes, labour market trends, education, economic performance, and developments in accessibility and infrastructure. For the first time, the report includes a Regional Potential Index, which highlights the strengths and weaknesses of the 74 Nordic Regions in relation to one another, and identifies the regions with the strongest growth potential.


What is the Nordic Region?

The precise definition of “the Nordic Region” has shifted over time. This report defines the Nordic Region as all municipalities and administrative regions of the five Nordic countries (Denmark, Finland, Iceland, Norway and Sweden), as well as the Faroe Islands and Greenland (both part of the Kingdom of Denmark), and Åland (part of the Republic of Finland). This definition is consistent with that used by the Nordic Council of Ministers. It is important to recognise that there are a number of Nordic territories which are not part of the administrative systems of Nordic countries but still belong to or are administered by these countries.

Read the Introduction

Theme 1

Demographic changes: Challenge or opportunity for Nordic societies?

Recent demographic changes in the Nordic Region are consistent with global trends in developed countries. Urbanisation has been a core feature of population increase, with the 30 largest functional urban areas absorbing over 97% of the Region’s overall growth over the past 20 years. Migration has been an important source of this growth, accounting for two thirds of the total population increase over the past 25 years. At the same time, rising old age dependency ratios are putting pressure on rural and remote regions and municipalities as younger members of the population drift towards urban and urban adjacent municipalities. Regions are also struggling with gender balance with men outnumbering women everywhere but in urban areas. These demographic changes pose a challenge to existing social structures and modes of service provision in Nordic countries. Similarly, meeting these challenges with creative approaches to governance, successful strategies to promote social cohesion and positive overall outcomes presents an opportunity for the Nordic countries to demonstrate leadership on the world stage.

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Theme 2: Labour force

Signs of recovery: High employment, low unemployment

The Nordic countries are performing well on indicators relating to labour force participation and education when compared to the EU as a whole. They enjoy higher rates of employment; lower rates of unemployment; higher rates of school completion; and high tertiary attainment rates, particularly among women. The average employment rate for the Nordic Region was 73.4% in 2014 compared with an EU average of 64.9 %. This figure reflects a post global financial crisis recovery in most countries, with a clear exception in Denmark where the employment rate has continued to drop. Notably, Iceland, which experienced the sharpest drop following the financial crisis, now has an employment rate well above the Nordic average. Education levels are also high in the Nordic countries, though perhaps not surprisingly, the highest levels of education can, to a large extent, be found in metropolitan areas, socio-economically strong municipalities, and university cities. Access to education is a key driver for young people to move from rural areas to larger centres. Despite these overall positive trends, there are regional and demographic differences which warrant consideration. Youth unemployment rates, though lower than the European average, remain at an alarming level in certain regions. Overall employment rates remain higher for males than females, though, again, the Nordic countries perform well in comparison to others. Finally, despite the Nordic countries’ strong performances on indicators related to education the overall trend is negative if you look at the PISA results.

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Theme 3: Economy

Economic growth concentrated in thriving cities

Nordic economies are performing well in the European context, with the strongest growth observed in the largest urban areas. There are a number of regions that are also performing well however it is important to note that the topperforming economies in the more peripheral regions are often thriving due to a large single industry. Private sector R&D investment has seen similar concentration in large Nordic cities, in particular the capitals Stockholm, Oslo and Helsinki Employment in knowledge-intensive sectors in Nordic Regions has been more evenly distributed with the exception of the northern parts of Finland, Sweden, and Norway, which lag far behind their southern counterparts. Tourism emerged as a potential new driver of Nordic economies thanks to extensive growth in travel to Sweden and especially to Iceland by a wide range of international tourists in the period 2008- 2014. The potential to expand this phenomenon to the whole Nordic Region remains, for the most part, unrealised but increased collaboration on tourism branding between countries would be a good first step. There is also scope for more broadly focused regional development policy to ensure resources and opportunities are distributed evenly between regional areas and their metropolitan counterparts. Ecoinnovation is currently “scattered” across the Nordic countries but represents great potential to provide new opportunities both to big city regions and to sparsely populated regions.

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Theme 4: Infrastruture

Green housing and infrastructure investments key to energy revolution

The way we live and travel is at the heart of the future energy revolution. As such, this edition of State of the Nordic Region includes chapters on housing and air accessability as a compliment to the energy chapter. The Nordic Region is a global leader in combining ambitious climate and energy policy with steady economic growth. This position is largely the result of an abundance of hydro, nuclear and geothermal energy sources and ambitious, long-term and stable policy frameworks focused on decoupling GDP from CO2. Although this is of course positive, it is important to acknowledge that the majority of these gains have been absorbed by an increase in the absolute demand for energy, particularly in the buildings and transport sectors. As a result, continued action that takes a multipronged approach to energy challenges is required. While renewing our energy consumption we need to bear in mind that providing appropriate and accessible infrastructure is also vital to supporting strong economic growth. Property has been steadily increasing in value over the past 10 years with increases in all of the Nordic countries surpassing the EU average by a substantial margin. These increases are perhaps a reflection of the failure of new construction rates to keep up with demand, particularly in the larger Nordic cities. Nordic countries have different supplement systems for housing provision, but, as yet, none have managed to address the increasing problem of housing shortage and high property prices in Nordic cities. Air travel is also increasing in all of the Nordic countries. One explanation for this growth is the way that some airports in the Nordic Region have used their peripheral location in a European context as a strategic advantage and become a gateway to other continents. Rail links between airports and city centres have also improved the accessibility of air transport in Copenhagen, Stockholm, Oslo and Helsinki. Substantial opportunity to continue this growth is apparent in the vast majority of airports in the Nordic Region. This has important implications for economic development in both the major cities and more remote regions, but also for the environment.

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Theme 5: Measuring regional potential

Nordregio's new Regional Potential Index (RPI)

Rankings and indexes are developed for many different purposes. One example from the EU level is the ranking of regions to define eligible areas for structural funds based on GRP levels in the past. National rankings are created to show the most favourable business climate or the best place to live. The purpose of Nordregio’s Regional Potential Index is to show the current performance of the 74 administrative regions of the Nordic countries; to identify regions with high potential for future development and their common denominators; and to identify regions in need of further support and policy measures to strengthen their potential and meet existing challenges. Last but not least, the index provides policy-makers with insights on regional strengths and weaknesses, and could be used for comparative learning between Nordic Regions with similar geographies but different outcomes in the ranking when it comes to creating effective regional development strategies.

Read more about the Regional Potential Index