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Economist: Latvian residents’ overall satisfaction with life is below most EU countries

Daina Paula/macroeconomics.lv.
There are many different measurements in the world that seem impossible to measure – our quality of life and development progress, says Bank of Latvia economist Daina Paula in a publication of makroekonomika.lv, commenting on different measurements that help characterize development of national economy and people’s quality of life.

Latvia’s position in such measurements is varied. For example, Latvia has the 20th freest economy among 180 countries (increase by 16 positions). Residents’ overall satisfaction with life has also improved, putting the country on the 54th place (increase by 12 places). This is also shown by the latest data from Heritage Foundation and World Happiness Report.

Aside from these tops, there are also other more or less known measurements that help characterize national economic growth, people’s quality of life and overall satisfaction with life.

«The quality of life does not change if we do or don’t know about these measurements, but they can nonetheless help create a valuable picture about the direction national economy is headed. This can be useful for the realization of countries economic policies,» the expert says.

How big are we and how do we grow?

Latvians make up only 0.026% of the world’s population. On top of that, Latvia’s population tends to decline, says the economist. «But Latvia’s contribution to the world’s GDP is close to 0.037% (assessment of the World Bank for 2015 and International Monetary Fund’s assessment for 2016) and 0.042% (UN assessment for 2015). This is not much. Nevertheless, an average Latvian resident producer higher added value than an average resident in the world. Looking at it this way, an average Latvian resident is also wealthier.»

In addition, if we look at how Latvia is represented in the world trade (in the value of its country’s sold goods), the country’s presence in world exports reaches 0.07%.

«The ability of the state and businesses to increase market share is often considered one of the touchstones for competitiveness. There are several recipes for improving market share growth. One of them, especially if the international market offers comparable goods, is finding a way to organize production in such a way that it is possible to reduce costs per each production unit,» Paula comments on market competitiveness.

It should be noted that Latvia’s export share in the world market had increased slightly in 2016. In the European Union, Latvia’s market share had grown 5.7%. Export hare in the EU grew at the expense of competitiveness effect, and not as much because Latvia would have increase exports to countries in which import volumes had increased (market effect) or categories of goods whose imports in EU countries had grown the most (product effect).

Can social policy help create the feeling that life is getting better?

Social progress index is high in countries that have well-developed social policies. Scandinavian countries are a prime example. Nevertheless, social expenses do not improve the feeling of happiness on their own, the expert says.

«First of all, to have such expenses a country need tax revenue. Of course, consumers could feel that paying large taxes also means they have the right to demand as much in return. However, social policy was created as a mechanism to patch holes. The reason for the very existence of social policies lies in society’s inability to form savings for all their needs, as well as the desire to equalize availability of some service even if consumers never use them,» Paula notes.

«There is always room for discussion about the state as a night watchman and how much it pokes its nose into people’s lives by offering all kinds of insurance mechanisms,» the expert mentions


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