The impact of national economy structural transformation on regional employment and income: The case of Latvia

Abstract

Structural changes taking place in national and regional economy may vary across nations and regions, causing socio-economic differentiation. This research is focused on analysis of the employment structure, its changes and influence on the level of social welfare, and its deepening of economic disparities between Latvian regions. We apply a comparative statistical analysis based on two tools: The Location Quotient and shift-share analysis, using official Latvian statistical data on employment and income with a breakdown by ten groups of economic activities for the period from 2008 to 2016. The obtained results indicate that the changes in the employment structure during the studied period had a noticeable impact on regional differentiation in Latvia. The authors have discovered that although employment concentration varies across Latvian regions, it remains remarkably stable over time, with occasional re-employment shifts occurring not always in the direction of industries providing higher income, which causes further regional socio-economic differentiation in Latvia.