Author: Anna Pluta
Evaluation of state enterprises in Latvia (2011–2012)
Duration: 2011–2012
Researchers: Tālis Putniņš and Alf Vanags
Project funded by the LR State Chancellery
Locating Entrepreneurial Creativity and Knowledge to Foster Growth of European Cities
Jaunākais raksts nr. 12 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Locating Entrepreneurial Creativity and Knowledge to Foster Growth of European Cities”.
Autori: Evgenii Dainov un Arnis Sauka
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Makroekonomiskais modelis: Izvērtējums par ES fondu ietekmi uz Latvijas tautsaimniecību (2011)
Projektu finansē Finanšu ministrija
Within the framework of European Union (EU) Cohesion Policy, Latvia as an EU member state has received and will continue to receive substantial funds[1], aimed at increasing the production potential of its economy. The funds thus received were invested in various segments of the economy: fixed assets; infrastructure development; human capital; and technology. The evaluation of the impact of such investment is a complicated task for two main reasons. Such investment has both a long-term effect, which manifests itself in a greater productive capacity of the economy, and a short-term effect, which acts through the demand side of the economy and may benefit both the sector in which investment is made and other sectors. Additionally, investment in one sector may indirectly affect other sectors even in the long term. For example, the construction of a new road increases the output of the construction sector, which directly affects the demand for labour and the wage levels in that sector. At the same time, a better road network potentially increases productivity (including labour productivity) in all sectors of the economy, and it can therefore be expected that an indirect effect of better road infrastructure is, for example, higher overall wage levels, which would lead to more demand both for goods produced domestically and for goods imported.
When modelling the impact of funds investment, taking account of these mechanisms and of the interrelationships between the various segments of the economy in a consistent manner requires an appropriate economic model. There is a considerable literature on the evaluation of EU structural policies based on macroeconomic models (an overview of simulation models used in the ex-ante evaluation of EU funds is provided by Lolos (2011)). For Latvia, an evaluation of the impact of EU structural policy using macroeconomic modelling was first done in 2000, when the HERMIN model was developed for modelling the ex-ante effect of pre-accession EU funds (Bradley et al, 2000). In 2007-2008, the LATFUN model was developed for the ex-ante and ex-post evaluation of pre-accession funds and EU funds that Latvia received or expected to receive after 2004 (BICEPS, 2008a and 2008b).
The macroeconomic model developed within the framework of this project has a number of advantages compared with the earlier HERMIN and LATFUN models. First of all, the model equations are fully based on econometric estimations, without calibration of short-term parameters; this provides better model in-sample fit. Secondly, the sectorial interrelationships have been estimated econometrically and rather than using input-output tables as in the HERMIN and LATFUN models. Input-output tables are available with a very long time-lag and for an economy such as Latvia which has experienced substantial structural changes in the past few years, it seems more appropriate to use an approach that is based on an empirical estimation. Lastly, this model minimises the use of dummy variables as possible, even though the equation parameters were estimated on data for the period including the 2008 crisis. This increases the robustness of the model. We tested model robustness as part of the project itself: initially, we estimated equation parameters for the period up to the fourth quarter of 2010, but in the second stage of the project we re-estimated the equations for the period up to the first quarter of 2011, and this had no significant effect on model stability.
[1] In the current programming period Latvia receives funds under the Convergence objective of EU Cohesion Policy and in the post-2013 period will receive funding a less developed region i.e. as a result of having GDP per capita at less the 75% of the EU average.
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Small- and Medium- Sized Businesses’ Growth Expectations and Financial Performance in Latvia: does Ethnicity Matter?
Jaunākais raksts nr. 11 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Small- and Medium- Sized Businesses’ Growth Expectations and Financial Performance in Latvia: does Ethnicity Matter?”.
Autori: Ruta Aidis, Tomasz Mickiewicz un Arnis Sauka
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Entrepreneurship and Philanthropy after Socialism
Jaunākais raksts nr. 10 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Entrepreneurship and Philanthropy after Socialism”.
Authors: Tomasz Mickiewicz, Arnis Sauka and Ute Stephan
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Venture Capital in Latvia Revisited
Jaunākais raksts nr. 9 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Venture Capital in Latvia Revisited”.
Autori: Alf Vanags, Julija Staševska un Anders Paalzow
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Mobile Termination: How to Regulate or Perhaps Not to Regulate at All?
Jaunākais raksts nr. 8 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Mobile Termination: How to Regulate or Perhaps Not to Regulate at All?”.
Autors: Alf Vanags
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Tax Reform in Latvia: Could it be Fair
New SSE Riga/BICEPS occasional paper by Alf Vanags (BICEPS).
Executive summary
The recently published guidelines for the medium term development of Latvia’s tax system (NodokĜu un nodevu sistēmas attīstības pamatnostādĦes 2011-2015” have for the first time introduced social fairness (socialais taisnīgums) as an explicit goal of Latvian tax policy. Social fairness is further explained in the guidelines as “a more progressive tax system” and a “lower tax burden on lower wage workers and a higher tax burden on exclusive properties”. The challenge for policy-makers is how to realise this goal in combination with the other goals, in particular the goal of improving the competitiveness of the Latvian economy. The aim of this paper is to operationalise the concept of fairness of a tax system by developing quantitative indicators of tax fairness. We take ‘progressivity’ of a tax or a tax system to be the fundamental indicator of fairness, where progressivity means that the tax liability of higher income groups is higher than their share of income and that the tax liability of poorer people is less than their share of income. This approach leads naturally to the use of the Kakwani index (developed by Kakwani (1976)) which provides a summary measure of the progressivity of a tax or a set of taxes defined in this way. A positive value of the Kakwani index indicates that a tax is progressive and a negative one that it is regressive and a zero value indicates that the share of tax liabilities of different income groups is exactly proportional to their share of income. This methodology is applied to Latvian experience in three ways: i) the recent changes in taxes between 2006 and 2010, ii) the proposals made in the government guidelines – removing the current reduced rate of VAT, 1.5% real estate tax, 21% income tax rate and 95LVL untaxed personal allowance, iii) as a comparator we consider the introduction of a 10% reduced rate of VAT on food. The main results are as follows:
- direct taxes are overall progressive but indirect taxes are overall regressive;
- the overall tax system is mildly progressive;
- international comparisons suggest that the Latvian tax system is towards the less progressive end of the spectrum;
- the tax measures implemented since 2006 have overall been regressive;
- the measures proposed in the guidelines are overall marginally regressive, especially removing the reduced rate of VAT and reducing the income tax rate to 21%;
- increasing the untaxed income allowance and introducing a higher property tax are both progressive;
- a reduced (10%) rate of VAT on food is quite strongly progressive even if it is used to substitute for the current reduced rate regime.
The revenue impact of the various tax changes suggests that the removal of the reduced rate of VAT and the extension of the property tax would result in more revenue but not by enough to compensate for the loss of revenue from the proposed income tax changes. The net effect would be a total tax revenue loss of 3.9% as compared with planned 2010 tax revenues. Thus, the policy paper measures are both regressive overall and would lose revenue. The comparator proposal of a reduced rate of VAT on food is clearly progressive and even if uncompensated by removing the existing reduced rate of VAT would result in an overall loss of 3.3% of planned 2010 revenues.
It is hoped that these results throw a new light on Latvia’s tax system and can inform the debate on tax policy in the election campaign and beyond.
Business Insolvencies in Latvia
Jaunākais raksts nr. 7 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Business Insolvencies in Latvia”.
Autori: Arnis Sauka un Friederike Welter
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
Productive and Unproductive Entrepreneurship in Latvia
Jaunākais raksts nr. 6 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Productive and Unproductive Entrepreneurship in Latvia”.
Autori: Arnis Sauka un Friederike Welter
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.