Depopulation and place-based policies: an analysis of the demographic, economic and attitudinal divide

Territorial polarisation is among the main megatrends of 21st-century globalisation. The causes of depopulation are structural and are associated with the dynamics of globalisation and agglomeration economies. In this policy brief we analyse data on the evolution of depopulation in Spain over the last 25 years and study the different manifestations of the territorial divide: demographic, economic and in citizens’ attitudes. We also address the different public policy options available to tackle the phenomenon.

Depopulation in Spain is far from uniform. In fact, between 1996 and 2020, the population of small and rural municipalities grew, on average, by 9.6%. However, this growth was very unevenly distributed. While rural municipalities as a whole in some regions such as Madrid (45%), Murcia (34%) or Catalonia (31%) grew very significantly, in other regions such as Asturias (-26.9%), Castile and León (-19.7%), Galicia (-16.9%) or Extremadura (-9.6%) their population fell very sharply.

The growth of small municipalities is concentrated on the Mediterranean coast and the islands, around provincial capitals and large cities, and along the main transport corridors. In Castile and León, for example, although most municipalities lose between 25% and 50% of their population, those bordering provincial capitals gain population. Meanwhile, small municipalities near large cities – for example, municipalities close to Madrid in the provinces of Guadalajara or Toledo – grow by more than 50% in many cases.

The effect of the pandemic on migration flows has translated into an improvement in the net migration of municipalities with fewer than 10,000 inhabitants in Spain. However, this improvement is mainly explained by the pandemic slowing the exodus from small and rural municipalities (by more than 60,000 people compared with the average of previous years) rather than by people moving from cities to villages. In small municipalities in provinces close to Madrid and Barcelona (such as Ávila or Girona), strong growth in residents coming from the large cities is observed in 2020.

The urban-rural divide shows marked demographic differences. In rural areas, for example, the share of the population aged over 65 is around 40%, while in urban areas it is 28%. There are also fewer women: while in large cities there are 95 men for every 100 women, in rural areas there are 102.

The urban-rural economic divide is also deep. While urban regions account for more than 65% of employment and generate more than 66% of all GDP, rural regions account for less than 2% of employment and generate similar figures in GDP. The differences in productivity are also remarkable, as are those in business performance measured by average company size (4.5 workers compared with 2.8 in rural areas) and the business survival rate.

The (pre-tax) income gap between urban and rural areas appears to be a strong incentive for attracting young talent: for those at the 20th percentile of the distribution, the gap is 862 euros. Among the highest earners, those at the 80th percentile of the distribution, the gap widens: those in large cities earn almost 5,000 euros more a year than their counterparts in small municipalities.

The economic and demographic divide, as in many other advanced economies, is associated with a values divide and greater social discontent in declining territories. The data show that in large municipalities the population tends to be more tolerant of immigration, abortion, homosexuality or gender equality. The data also capture differences in attitudes towards democratic institutions, with signs of greater discontent in rural municipalities. These data should be treated with caution, as they are conditioned by the limited availability of quality data in Spain and other factors such as the different composition of the population.

A relevant element in explaining the causes of discontent is linked to the gap in satisfaction with public services across territories. Some interesting patterns are observed which, in some cases, could be counterintuitive. In education, for example, the percentage of citizens who are satisfied tends to fall the larger the municipality. In transport, the opposite is true: the smaller the municipality, the lower the satisfaction with the transport services offered. And something similar happens with healthcare.

Depopulation generates social costs beyond purely economic ones. These costs increase as depopulation grows. It is therefore necessary to design effective policies to try to mitigate its effects over time. There are no magic solutions, and at best the aim of policies will be to slow down a process that, for certain territories, is inevitable.

Recently, investment commitments to fight depopulation have multiplied at all levels of government. The government’s own recovery plan includes a commitment of 10 billion euros for this purpose, although in reality it groups together very diverse policies that are not very specific in this regard. In Spain, however, the debate on which policies and investments work has so far been completely absent.

In our analysis of the comparative evidence we find the following:

• Repopulation dynamics can occur in rural municipalities close to large cities.
• Top-down policies of large “white elephant” infrastructure projects (airports, etc.) are usually not a good idea. Their effectiveness is also strongly conditioned by the institutional quality of the region.
• The focus of policies should therefore be on fostering the conditions for economic activity to emerge in declining areas, tailoring policies to the needs and opportunities of each place. A good example of this change of approach is the one applied in Scotland with “Highlands and Islands Enterprise”, with considerable success: an independent agency responsible for identifying and prioritising investments.
• We distinguish between two types of policies: (1) large-scale policies that focus on mitigating centre-periphery dynamics and (2) small-scale policies that also vary according to the characteristics of the municipality.
• In the first group, the evidence shows that infrastructure investments connecting the periphery with the centre tend to accelerate (rather than contain) depopulation dynamics. On the other hand, infrastructure connecting centres of activity in the periphery can help slow down the depopulation process. In turn, policies to decentralise governance (decision-making and institutions) can generate positive dynamics of opportunity in declining regions.
• In the second group, we find that tax incentive policies appear to have a positive effect in slowing the pace of depopulation, but their effectiveness varies with the size of the municipality and they have heterogeneous effects on employment.
• Birth-rate policies for small municipalities are a poor investment if they do not create the opportunities for young people to then stay in those declining areas. By contrast, active policies to attract immigration do show positive effects, particularly in municipalities close to large cities or with a strong orientation towards tourism.
• Investment in schools and the decentralisation of universities do appear to have positive effects in slowing depopulation and generating opportunities in declining areas.
• Digital expansion can be key in a repopulation strategy, bearing in mind that the power of face-to-face interaction in cities is much greater, which limits the expected benefits of digitalisation.