Productivity and Competitiveness: Future Challenges

Purpose:This chapter aims to provide a comparative analysis of productivity and competitiveness in 13 new European Union member states (EU-MS). Need for study: The need for this study is determined by the slow growth of productivity in the EU, the necessity of the ‘productivity renaissance’, and the need for considerable acceleration of productivity growth in the new EU-MS at the lower end. The authors examine the reasons for the productivity backlog in these countries. Latvia, where productivity is among the lowest in the EU, has been selected as a case study. Methodology: A special methodology has been applied to assess the impact of the redistribution of labour resources on the overall productivity dynamicsin the Latvian economy. The core methodological approach used in the study is the method of structural changes’ impact analysis, shift-share analysis. The main sources of the statistical data used in the study are theCentral Statistical Bureau of Latvia (2024), the Statistical Office of the European Union (Eurostat, 2024), and the Organization for Economic Cooperation and Development (OECD). Findings: The findings include the identification of the reasons for low-productivity dynamics, an impact assessment of the COVID-19 pandemic and recent geopolitical factors on productivity, a comparative analysis of productivity trends in 13 new EU-MS, especially in the Baltic states in the international context, specific conclusions on Latvia’s productivity development, and future challenges. Practical implications: The authors have elaborated policy recommendations for policymakers, which can be used to improve productivity and competitiveness in Latvia and other new EU-MS.