Files
Abstract
The paper uses a bi-regional CGE model to assess the potential impacts of an
alternative rural development policy design, which is more targeted to public sector
investments on the economic activity of a lagging region in Latvia. The results show
the distribution of effects between the rural and urban areas within the region as well
as differences in the impacts between the three policy scenarios that are explored. All
scenarios generate positive effects in the economy. However, the “Investment in
Public Sector with enhanced envelope” scenario is the one that leads to the largest
impacts in the economy. The “Investment in Public Sector with no envelope” is the
second best scenario and has better effects compared to the Scenario that has
enhanced financial envelope but with no reallocation. Overall, the results suggest that
it’s not only enhanced funding that will improve economic performance in an
economy but also the targeting of these funds to the more productive sectors of the
economy that have the highest linkages within the economy and consequently the
potential to create strong direct and indirect effects spread to the regional economy.