Academic journal article Baltic Journal of Economics

Factors of Economic Growth in Latvia

Academic journal article Baltic Journal of Economics

Factors of Economic Growth in Latvia

Article excerpt

Doctoral Thesis defended on 22 March 2013 at the University of Latvia.

Supervisor: Ismena Revina. Reviewers: Elvira Zelgalve, Irina Arhipova, Amis Sauka.

Summary is available electronically: http://ideas.repec.Org/p/pra/mprapa/45500.html

Full text is available at the library of the University of Latvia or upon request.

E-mail: Olegs.Krasnopjorovs@bank.lv; olegkrasn@inbox.lv

Uneven economic growth during recent years raises the question whether any factor of economic growth exists in Latvia aside from economic cycle fluctuations. This Doctoral Thesis assesses long-term economic growth factors in Latvia, using econometric modeling techniques, and solves various problems that arise when such techniques are used for Latvia.

Section 1 constructs a theoretical base for the application of economic growth research methods for Latvia. Based on the neoclassical growth model and its extensions, it analyzes several growth accounting and development accounting frameworks, including regression and national accounts approaches to assessment of the production function, parametric and nonparametric methods to measure the sources of cross-country differences in labour productivity level and growth rate as well as various real convergence concepts, including absolute and conditional beta-convergence, sigma-convergence and club-convergence.

Section 2 estimates the production function for the period 1995-2010 and identifies the main GDP growth factor in Latvia as fixed capital accumulation in the private sector. Moreover, it was found that every euro of public capital in Latvia on average is at least as productive as the euro of private capital. As in any post-transition economy, reliable fixed capital stock data are lacking. Therefore, emphasis was put on the methodological features of statistical data as well as on checking result stability in respect to alternative methods and assumptions. It was found that previous research efforts were likely to underestimate the role of fixed capital accumulation and overestimate the role of total factor productivity (TFP) in Latvia's GDP growth.

Section 3 uses the non-parametric Data Envelopment Analysis (DEA) method to construct the world production frontier, which includes Romania, Ireland, the USA and Luxembourg. …

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