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OECD Reviews of Labour Market and Social Policies: Latvia 2016

image of OECD Reviews of Labour Market and Social Policies: Latvia 2016

Latvia has undergone major economic and social change since the early 1990s. Despite an exceptionally deep recession following the global financial crisis, impressive economic growth over the past two decades has narrowed income and productivity gaps relative to comparator countries in the OECD. But Latvians report low degrees of life satisfaction, very large numbers of Latvians have left the country, and growth has not been inclusive. A volatile economy and very large income disparities create pressing needs for more effective social and labour-market policies. The government’s reform programme rightly acknowledges inequality as a key challenge. However, without sustained policy efforts and adequate resources, there is a risk that productivity and income growth could remain below potential and social cohesion could be further weakened by high or rising inequality.

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Assessment and recommendations

Latvia is a small open economy with a population of around 2 million. Like other economies in Eastern Europe and the former Soviet Union, Latvia underwent major economic and social change since the early 1990s. After regaining independence in 1991, the transformation from planned to market economy was accompanied by fundamental reforms of political institutions and integration into the European Union and, in 2014, into the euro area.

English

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