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Impact of Rural Development and Structural Policies: The Swedish Experience and Lessons for Latvia

This study examines the impact of rural development and structural policies in Sweden from 2000-2006 and explores their relevance for Latvia. It analyzes measures taken in areas such as sustainable ecological development, economic and social support, investment in agriculture, and more. The study evaluates the effectiveness of these policies, addresses market failures, regional disparities, and the role of social capital in rural development.

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Impact of Rural Development and Structural Policies: The Swedish Experience and Lessons for Latvia

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  1. Impact of rural development and structural policies : The Swedish experience and lessons for Latvia Dr.oec. Ewa Rabinowicz, Professor, Sweden:

  2. The second pilar measures in Sweden 2000-2006, MSEK • Sustainable ecological development 21,497 • Sustainable economic and social support • Investment in agriculture holgings 295 • Setting up young farmers 230 • Human resources in farming 135 • Processing and marketing 225 • Project support (art.33) 502 • Total 1,387

  3. Summary of measures for 2003, MSEK

  4. Comments • Hardly lack of money • Are positive effects visible? • General effect according to several studies • Catching up at national level • Disparities at regional level • Evaluation of specific RD-policies • Difficult to evaluate due to the lack of data • Often disappointing results esp. for project support • WHY???

  5. Key issues • Can present policies in principle stimulate economic development • Is it possible to counter-act the present concentration of economic activity? • Are market failures addressed?

  6. Why does regional development differ? • Market failures hinder rural development • Low labor movement mitigate unemployment reduction • Advantages of agglomeration lead to concentration and give rise to persistent regional differences.

  7. Implications • A possible trade-off between overall national growth and regional inequalities • The role of social capital

  8. Market failures • There are two types of market failures that can mitigate rural development • Traditional market failures that are aggravated by distance • Distance can, in itself, give rise to market failures

  9. Traditional market failures • Asymmetric information in capital markets • High transaction costs • Lack of information

  10. Additional market failures • Negative externalities for remaining individuals in areas with out-migration • Congestion in the cities • Lack of competition in rural areas • Positive externalities due to agglomeration. Is there too much (or too little) agglomeration?

  11. Targeted market imperfections • Income support/equity (redistribution) • Capital market imperfections (investment) • Transaction costs • Missing contingency markets • External effects / public goods (environment) • Social capital defiances

  12. Support to start, expand or diversify business • Could be a good idea if: • good business ideas are present • and market failures which hinder commercialization of these ideas are present

  13. BUT support… • cannot create business opportunities • can become an indirect support of income • can give rise to ‘project fatiguee’ However • a positive effect on social capital is possible

  14. Compliance between policy and problems? • The link between objective and measure • Bias towards agriculture, especially in the rural development program • Horizontal or selective measures?

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