Life at the frontier: How Finland’s shrinking border regions are adapting and advancing

Across the OECD, many rural regions are facing a common challenge: population shrinkage. The symptoms are familiar – declining tax bases, ageing communities, and rising costs for public services and infrastructure. It is easy to view these developments as signs of irreversible decline.  

But there is more than that. In the face of deep demographic and geopolitical shifts, these regions are not sitting on their hands. They are adapting, innovating, and in some cases, even outperforming expectations. 

Beyond “going for growth”

For decades, the classic response to rural decline has been to try to reverse it – attracting new residents, promoting investment, and hoping to bounce back. But a new policy mindset is emerging.

Known as “smart shrinking,” it acknowledges that population loss may be inevitable in some places, and that it is still possible to build vibrant, resilient communities even as numbers fall. 

This approach focuses on improving the quality of life in shrinking communities, using resources more efficiently, and fostering innovation in how services are delivered. Some even go further, embracing a strategy of viewing fewer people not as a liability but as a new opportunity.

A smaller population can mean less congestion, stronger social bonds, greater access to nature, and reduced environmental pressures. For those who choose to stay, the community may become more cohesive and adaptable, partly because the remaining residents share similar preferences.

This opportunity comes with trade-offs. The approach can only succeed if residents are both willing and able to bear the higher per capita costs for public services, or if the private sector can effectively fill the gaps left by a retreating public sector. In this sense, “smart shrinking” is not a passive response to decline, but a deliberate strategy that requires investment, innovation, and strong community engagement. 

A new approach to managing population shrinkage 

Finland’s strategic shift 

Nowhere is this evolution more visible than in Finland’s eastern and southeastern border regions. Following Russia’s invasion of Ukraine and the closure of the Finnish-Russian border, these areas have taken on a new geopolitical role. Once gateways to trade, security and defence is now a major concern, prompting a need to develop dual-use infrastructure that serves both civilian and defence needs. 

Recognising this, the Finnish government has launched two major development initiatives: the Northern and Eastern Finland Programmes, signalling a shift in how Finland views its borderlands – from peripheral challenges to strategic assets. Initiatives in the Programmes include the establishment of “Invest In” teams to attract domestic and international investment, with additional incentives specifically targeted at businesses in the eastern regions.

Infrastructure development is another cornerstone, with the expansion of the 400kV power grid along strategic eastern routes to support new industrial activity, as well as upgrades to the Karelia and Savonia railway lines to improve connectivity and logistics. 

On the security front, Finland is establishing a Security Competence Centre in Kuopio (North Savo) to strengthen national expertise in cybersecurity and crisis preparedness. The government will also support the creation of a European Logistics Institute (ELI) centre of expertise in eastern Finland. In parallel, Finland is investing in dual-use infrastructure that meets both NATO requirements and supports regional economic development. 

Not just decline  

One of the most compelling signals that something is changing comes from the labour market. Despite ongoing population loss, recent data show that the employment rates in the Eastern and Northern Programme areas have steadily improved since 2019 and have converged with rest of Finland.

This trend suggests that, even as overall labour supply contracts, those who remain are finding jobs more easily. Through targeted investments in skills, infrastructure, and innovation, local economies may be becoming leaner, more adaptive, and better able to match people with opportunities. 

A testbed for the future 

Finland’s experience offers an interesting case study for other shrinking regions across Europe and beyond. Instead of treating demographic decline as a policy failure, it’s possible to use it as a catalyst for reinvention.

That means building smarter, more sustainable economies, not by chasing growth at any cost, but by focusing on resilience, adaptability, and the welfare of the people who decide to stay. 

Shrinking doesn’t have to mean failing. With the right strategies, it can mean rebalancing, rethinking, and revitalising. Finland’s border regions are showing that a new story is possible – and it’s one well worth watching. 

OECD support for adapting to shrinkage in Finland’s border regions
The OECD provides a range of resources for designing resilient, place-based responses in areas experiencing demographic decline. Key publications include Reinforcing Rural Resilience, Navigating Global Transitions in European Arctic Regions, and the OECD Economic Survey of Finland, which together offer guidance on smart shrinkage strategies, regional adaptation, infrastructure programming, and local wellbeing frameworks.