Too few locally produced goods on the shelves of Latvian shops: Reality or myth?

New SSE Riga/BICEPS occasional paper by Morten Hansen (SSE Riga) and Alf Vanags (BICEPS) / Presentation.

Abstract. This investigation addresses the issue of what truth there is behind the widespread belief that too few Latvian produced food products are available in Latvian shops. Using some simple concepts from economics we construct a number of empirical indicators that permit international comparisons to be made. These are indicators of revealed comparative advantage, of the extent to which home consumption of food products is covered by domestic production, indicators of the share of domestic production that is exported and imported, and indicators of productivity relative to the EU-27. We find that Latvia does not differ much in most respects from our Baltic neighbours. Both Latvia and Estonia are net importers of food products while Lithuania is marginally a net exporter. Perhaps surprisingly Latvia covers about 50% of its food products consumption from domestic production which is more than in Estonia or Lithuania. This ‘self-sufficiency’ indicator is highest in countries such as Poland and Romania, with self sufficiency ratios of around 80% and as high as 97% for some individual products. Low self sufficiency ratios are found in for example the Netherlands which covers only 15% of its food products consumption by local production. At the same time it turns out that the high self-sufficiency countries export very little of their food products whereas the Netherlands exports very nearly 90% of its food products output. We conclude that Latvia is about average in terms of the availability of local products and in fact local products are more available here than in Estonia and Lithuania. If there is a problem in Latvia it concerns low productivity levels in the food products sector. Thus in food products as a whole Latvian productivity is less than 50% of the average while in the most productive countries, such as Netherlands and Belgium it is more than three times higher. In fish products productivity is less than 30% of the EU average while in Belgium it is more than six times higher. It is here that attention should be focussed and we recommend the creation of both working groups and research to address the productivity issue.