Productivity trends and income inequality in Latvia
Date
2020
Authors
Baranova, Daira
Baranovs, Olegs
Skribane, Irina
Journal Title
Journal ISSN
Volume Title
Publisher
University of Latvia
Abstract
Increasing labour productivity is a key driver for prosperity. Although Latvia's productivity growth rates
are among the highest in the EU, productivity growth has declined in recent years. With the productivity dynamics
slowing down, the pace of convergence is also slower. The benefits of the recent economic recovery in Latvia have
not been evenly distributed among households and income inequality has not diminished significantly. The recent
OECD and academic studies point to a correlation between falling productivity and increasing income inequality. The
more unequal a society is, the more it affects productivity growth and the sustainability of growth. Improving
productivity has the potential to affect inequalities in a positive and negative way. To find suitable policy answers
therefore is extremely challenging.
The research describes the dynamics of productivity and income inequality, their interaction in Latvia. The
research is based on existing data, studies, and policy documents. It aims to integrate the available data from a broad
range of international and domestic sources from the perspective of Latvia. The research argues that easy gains from
catching up are over, keeping productivity dynamic will not be easy, as the factors that provided relatively high
productivity rates in previous periods are likely to be exhausted and companies are approaching the limits of existing
technology. Continued progress in implementing structural reforms will be needed to reduce the productivity gap,
only systemic implementation of all policies and structural reforms can provide a desirable outcome. In order to reduce
income inequality, it is important to strengthen the competitiveness of the regions of Latvia and to improve the tax
and benefit system.
Description
Keywords
productivity , income inequality , economic policy , Research Subject Categories::SOCIAL SCIENCES::Business and economics