Usefulness of the article: This article proposes to study local development from several perspectives: human, economic, and natural capital, and the links that shape them. To do so, it draws on the concept of the agglomeration effect of individuals. Through an analysis of the Île-de-France region over the period 2016-2019, it presents the strengths and challenges inherent in this development model.
Abstract:
· The Île-de-France region has the highest population density in Europe and the youngest population in France. Its potential is all the greater as it is the most highly skilled region in France. As a result, the Île-de-France region has the largest production base in Europe and the most productive in France.
· The region’s attractiveness is reinforced by its ability to train and attract young talent and offer the highest salaries.
· However, Île-de-France faces new challenges. It also concentrates and attracts many low-skilled workers. As a result, inequalities with regard to the most skilled workers are the highest in the country.
· The concentration of Île-de-France residents and their living conditions, although disparate, make them a vulnerable population in the event of a pandemic, as demonstrated by COVID-19.
· In environmental terms, the region is a victim of its own attractiveness. Its air is among the most polluted in France, despite a lower level of local pollution per capita.
The Île-de-France region is a textbook case for understanding the phenomenon of metropolization. The Grand Paris project demonstrates the desire of local authorities to develop the region’s attractiveness. The « market size » effect developed by Krugman and Helpman in 1985 can be used to address the economic impact of metropolization, which leads to a concentration of individuals.
In short, the larger the market size in terms of consumer numbers, the greater the production potential, both in terms of recurring and new needs. This phenomenon is sustained by a virtuous circle in the region concerned, since companies need labor, which works and consumes, attracting new companies, and therefore new consumers, and so on.
Through a socio-economic analysis of the region over the period 2016-2019, we aim to illustrate the agglomeration effect and understand its externalities. This process is a boon for the local economy and territorial development, but it must contend with new ecological, health, and economic challenges.
I/ Agglomeration effect: a boon for local development
1. The densest population in Europe and the youngest in France
The Île-de-France region is the most densely populated in France, with a density ten times higher than the national average[1]. The inner suburbs have a density 50 to 70 times higher than the French average, while the capital itself has a density 200 times higher than the national average. In 2016, Paris was the most densely populated capital in Europe with 20,780 inhabitants per km². However, it is only thesixth most densely populated city in France[2], surpassed by four municipalities in the inner suburbs.
The Île-de-France region also has the youngest population in metropolitan France. The inner and outer suburbs have the lowest aging indices in metropolitan France. The Paris department has the highest concentration of inhabitants aged 20 to 39,with nearly one in three people in the region compared to just under one in four in metropolitan France.
2. The most wealth-creating production fabric in Europe
According to Eurostat’s NUTS2 data, Île-de-France was the region that created the most added value in Europe, with €734 billion. This is almost twice as much as Lombardy, the second most productive region in Europe in terms of added value, with €388 billion. The region alone produced 30% of the national wealth in 2016. Firstly, its workforce is the most abundant but also the most active in France. As a result, businesses are larger and more numerous than the national average. Seine-et-Marne and Val d’Oise are the two exceptions to this observation and are also the only two departments in the region whose GDP per capita is lower than in mainland France.
In addition, the inhabitants of the Paris region are the most productive in France in all sectors except agriculture. Furthermore, the Paris region’s economy is the most specialized in high value-added activities such as research, information and communication, and finance (see Table 1). Real GDP per capita also reveals these disparities. In 2016[4], Paris and Hauts-de-Seine had levels 2.9 and 3.1 times higher than the French average, respectively .
Table 1: Value added per employee in 2016 expressed in constant EUR[5]
Source : OECD data, compilation and calculations by La Banque Postale and BSI Economics.
3. A network effect conducive to the sustainability of agglomeration
Specialization in high value-added activities and more productive work require a skilled workforce, and the reverse is also true (see graph 1). The Île-de-France region offers a very attractive range of educational opportunities and is home to a large number of nationally and internationally renowned universities in all fields[6], with the top three (Paris-Saclay, La Sorbonne, and ENS Paris) located in Île-de-France.
Graph 1: Qualification level of the non-schooled population aged 15 and over
Source : INSEE data, compilation and calculations by La Banque Postale and BSI Economics
These concentrations of schools and businesses encourage concentrations of human and financial resources. [7] Île-de-France alone accounts for more than one in three French researchers in the public sector and four in ten in the private sector.
II/ New challenges inherent in the agglomeration effect
1. Economic challenge: the most unequal region in France
In Île-de-France, the richest 10% had a standard of living 4.5 times higher than that of the poorest 10% in 2016 (see Graph 2). Paris and Hauts-de-Seine have the two highest median incomes in the metropolitan area, while Seine-Saint-Denis has the lowest. In addition, the proportion of Séquano-Dionysians (inhabitants of Seine-Saint-Denis) living below the poverty line[8] is the highest in metropolitan France (28% compared to 14.5% respectively). On a more local scale, Aubervilliers, a commune bordering Paris, has the highest poverty rate in metropolitan France at 45%. Paris is the most unequal department in France in terms of the interdecile ratio[9].
The labor market contributes to these significant inter- and intra-regional disparities. First, almost all departments in the Paris region had an unemployment rate below the national average (8.4%) in 2019, except for Val d’Oise (8.5%) and Seine-Saint-Denis (10.8%). Secondly, workers in the region were the highest paid in France in 2016. Parisians and residents of Hauts-de-Seine even had average net hourly wages of €23.1 and €22.3 respectively, while the average for metropolitan France was estimated at €14.7 according to INSEE.
Graph 2: Poverty and inequality in 2016
Source: INSEE and CNAF data, compilation and calculations by La Banque Postale and BSI Economics
Conversely, Seine-Saint-Denis is the only department in the region with an unemployment rate and average wage that are higher and lower than the national average, respectively. It is also the department in the region most affected by precarious contracts (fixed-term and part-time). It should be noted that 38% of Seine-Saint-Denis residents have no recognized qualifications, the highest proportion observed in mainland France. The trend is worsening, since
Finally, access to the housing market in the Paris region is difficult, particularly in Paris. According to INSEE, 1.2% of the Parisian population left the capital between 2017 and 2020, the largest decline in mainland France over this period. However, rents have risen much faster than inflation, reflecting very strong demand for housing in Paris. In short, it is important to understand that the capital’s attractiveness is not declining, even if its population is tending to decline.
The economic challenge is therefore to ensure more inclusive development. The population of Seine-Saint-Denis is the youngest in France, but it is also the least well educated in the country’s most competitive labor market. While harnessing this human potential could be a path to more inclusive and significant development, it could also become a highway to more exclusive and less significant development. The lack of qualifications in a labor market that demands more restricts access to employment and adequate wages. De facto, the individuals concerned will be less able to support the local private economy through consumption and will be more dependent on public assistance, which means additional expenditure for the state at a time when the debt burden is becoming increasingly heavy.
2. Health challenge: living conditions conducive to contagion
According to INSEE, in 2016, Paris and its inner suburbs were the four departments with the highest rates of overcrowding[10] in France, with more than one in three dwellings in each of these areas affected. In Paris and Hauts-de-Seine, this can be explained by the size of the dwellings. In Seine-Saint-Denis and Val-de-Marne, it can also be explained by the size of households, as these two departments had the highest number of people per main residence in France for the same year.
The capacity of hospitals in the Paris region for long-term hospitalization was below the metropolitan average in 2017 (see graph 3). Seine-et-Marne and Seine-Saint-Denis are respectively the first and third least well-equipped departments in the metropolitan area. In addition, the region has twice as many private for-profit hospitals as the metropolitan area. In Seine-Saint-Denis, nearly four out of ten hospitals are private for-profit hospitals, four times more than in metropolitan France. Finally, according to INSEE data, the region has a shortage of general practitioners. None of its departments, with the exception of Paris, meets the WHO recommendation of one doctor per 1,000 inhabitants.
Graph 3: Hospital capacity for short- and long-term hospitalizations in 2018
Source: DREES Health Panorama, compilation and calculations by La Banque Postale and BSI Economics
In any case, the exceptional density of the Paris region’s population and their living conditions, although disparate, are factors that aggravate the speed of virus contagion. Hospital admission capacities are a response at the time of care and not a solution for containing the pandemic. However, in practice, it is very difficult to estimate the sufficient number of places. For example, Paris was one of the departments most affected by COVID-19 in terms of deaths, even though the Paris department has the highest per capita hospital admission capacity in France. Local public authorities and private actors must therefore coordinate and work together to find solutions to enforce social distancing and reorganize gatherings of people.
3. Ecological challenge: very high local pollution but assets favorable to transition
The capital and its inner suburbs are characterized by very high concentrations of fine particles and nitrogen[12]. Over the period 2000-2018, although air quality improved, Paris and its three neighboring departments still exceeded the WHO recommended thresholds for nitrogen dioxide and PM10. These pollutants result from human activities such as transportation (cars, planes, etc.) and housing (heating, electricity, etc.).
The population of Île-de-France is, per capita and on a local scale, the least polluting in France [13]. In 2018, Île-de-France residents consumed the least electricity in their homes and produced the least household waste in France[14]. In addition, they consume the least amount of road fuel. The local public transport network allows nearly one in two Île-de-France workers to use public transport to get to work. According to INSEE, one in three Parisians owned a vehicle in 2016, the lowest proportion in France.
However, Île-de-France remains one of the most polluted regions in France. Thanks to the capital, it is a tourism giant. The region alone accounts for 25% of all hotel rooms in the entire metropolitan area[15], and Paris-Charles de Gaulle Airport is thesecond busiest in Europe[16]. The Île-de-France market is huge in terms of density, so demand is very high. Its openness also means that it satisfies external demand. As a result, road traffic is very heavy and often congested.
The question is therefore how to reconcile an increase in the consumption of goods and services with a reduction in pollutant emissions. The first question to ask is about the specialization of the Paris region’s economy. Agriculture is virtually non-existent in the region, which is less industrial than the metropolitan average. This complicates the local production of goods, such as basic necessities (food and hygiene products). Tourism policy is also a thorny issue. Less tourism means less pollution and less revenue for the public coffers or « private pockets. » Thus, reducing tourist flows will not be without social costs, just as increasing these flows will not be without ecological impact. In any case, the ecological transition must be « viable, livable, and sustainable […] for present and future generations.« [17] The tourism sector must seek to reduce its dependence on customers from far away, just as the aviation sector must reduce its carbon footprint, whether through innovation in its aircraft or by financing projects aimed at this goal.[18]
Conclusion
Île-de-France, the most densely populated region in Europe, attracts and concentrates the youngest and most skilled population in France. This agglomeration effect makes it the most productive region in Europe, with an economy that is more specialized in higher value-added activities. As a result, companies produce more wealth and offer better salaries, to such an extent that Île-de-France residents have the highest disposable income in France.
Nevertheless, the agglomeration effect faces major challenges. In terms of health, a very open and densely populated area is also vulnerable in the event of a pandemic such as COVID-19. In terms of the environment, the Paris region is more a victim of its own attractiveness and concentration of people than of the local consumption patterns of its inhabitants. Finally, economically speaking, the influx of businesses also tends to create a highly competitive labor market, which penalizes the least qualified and reinforces inequalities. Seine-Saint-Denis is a perfect example of this phenomenon, as it is the poorest department in mainland France within the richest region of the country.
[1] Calculations and assumptions are based on INSEE data unless otherwise stated.
[2] It ranks behind Levallois-Perret (92), Vincennes (94), Le Pré-Saint-Gervais (93), Saint-Mandé (94), and Montrouge (92). However, nine of the twenty Parisian arrondissements are denser than Levallois-Perret (the11th arrondissement being the most densely populated with 40,059 inhabitants per km² compared to 26,332 in Levallois-Perret).
[3] Based on the activity rate (number of active people/total population) provided by INSEE. It is 76.3% in the Paris region, compared to a national average of 74%.
[4] Figure calculated based on OECD gross value added data and INSEE population figures for the same year.
[5] Note : real estate activities take into account imputed rents (= rent that owners would pay each month to live in their property).
[6] According to the Shanghai Academic Ranking of World Universities for 2019.
[7] Figure calculated by the author based on regional research and development data for 2017 and semi-final data from the Information Systems and Statistical Studies Department (SIES) available on INSEE
[8] At the relative threshold of 60% of median disposable income per consumption unit (= per capita, taking into account household structure, i.e., number of adults and children) in France. INSEE figure from the FiLoSoFi file.
[9] Ratio of the median income of the richest 10% to that of the poorest 10%. In Paris, it was 6.3 in 2016, which means that the richest 10% live on an income 6.3 times higher than that of the poorest 10%. This ratio is 3.5 in France.
[10] Number of primary residences (excluding overcrowded studios for one person) / number of primary residences excluding studios for one person . Indicator created by INSEE. A dwelling is considered overcrowded when it lacks one room relative to the occupancy standard defined by the institution (one living room, one room per adult, one room per child over the age of 7).
[11] According to INSEE, this is the10th department with the highest increase in the number of deaths between March1 and April 30, 2020 (+64% in the number of deaths during this period compared to 2019, compared to +27% during the same period on average nationally).
[12] According to AirParif’s annual report « Air Quality and Activity Report for 2018 » published in November 2019.
[13] There are three levels of pollution: local, national, and international. Here, this observation only describes activities that affect local pollution. On the other two levels, there is no guarantee that the population of the Paris region will remain the least polluting in France.
[14] Data on fuel consumption comes from the Ministry of the Environment, data on public transport use comes from INSEE, and data on waste production comes from ADEME.
[15] Calculations by La Banque Postale and BSI Economics based on INSEE infrastructure data for 2018.
[16] According to the 2018 ranking published annually by Airports Council International.
[17] Terms used in the 1987 Brundtland Report and adopted by the Rio Summit in 1992 to define sustainable development.
[18] Air France has already set a target of reducing its CO₂ emissions per customer/km by 50% by 2030 compared to 2005.
