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RESEARCH PRODUCT

THE PRODUCTIVITY AND COMPETITIVENESS PROBLEMS OF LATVIA IN THE CONTEXT OF THE GLOBAL ECONOM

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In the article the dynamics of labour productivity in Latvia was analyzed and the factors which have influenced the labour productivity in last 5 years were detected, to compare the productivity in Latvia with EU average. Analysing changes in productivity and labour costs in Latvia from 2013 till 2017, we can see that growth of labour costs exceeds the growth of productivity by more than 2 times in both, tradable sector and total economy. Slow growth in productivity compared with the labour and other production expenses lead to an increase in the price of final goods and services, which negatively corresponds with producers’ competitiveness in both internal and external market. Also, the attention is focused on how to increase productivity growth potential and improve the competitiveness of Latvia. One of the main challenges for Latvia is the creation of new competitive advantages that are associated with investments in the latest technologies, innovation, research, human capital, efficient allocation of resources and redistribution that comes with the behavioural changes of economic subjects. The main conclusion of the research shows, that two mutually interconnected processes determine increase of productivity level. First, they are the entrepreneurs’ choices about competitive advantages on which their business strategies are based, which define the business management and technological decisions (to modernize production or to move resources across sectors, to other region or even other country). Second, it is the ability of the country to ensure the reallocation of its resources to the most productive firms and sectors, i.e. to promote structural reforms or “technological upgrading”.