Empirical interpretation and measurement of the productivity and efficiency of regions: the case of Latvia

Abstract

The main concepts of this study are productivity and efficiency, which are very relevant for Latvia and are reflected both in the latest scientific publications, dissertation researches and analytical reviews of the Latvian ministries and representatives of the European Commission in Latvia, as well as in expert reports published in the press. The objective of this article is empirical interpretation and search of the most corresponding to the terminological background method of measuring of the productivity and efficiency of regions, based on a specific example of the regions of Latvia. The results of the previous authors' research showed that the productivity of region is defined as it`s ability to create as many as possible goods or services per unit of time, while the efficiency is the pure economical term that takes into account the amount of the factors of production utilizied in the production process. Productivity / efficiency of a region is not only the sum of the productivity / efficiency of economical units functioning in this region, as contains a certain "delta"synergy effect (for factors of production), agglomeration effect (for enterprises) or concentration effect (for industries). Always economically backward Latvia's region (Latgale region) is not with the lowest productivity calculated by the GDP per 1 km 2 of a region's territoryby this indicator less successful in Latvia is Vidzeme region. But by the earnings index, calculated taking into account the sectoral structure of employment in a region, exactly the Latgale region as usually occupies the last place in Latvia, and the Riga regionthe first one. To calculate the efficiency of Latvia's regions, the authors relied on neoclassical growth models, which take into account the main classical factors of production -labor, land, capital. By the efficiency in Latvia the Riga region leads expectantly, almost 2 times exceeding the efficiency of Pieriga region, and more than 3 times,the efficiency of Latgale region. But lowest efficiency in Latvia is not in the Latgale region, but once more in Vidzeme region.

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