1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Regional development in Lithuania: A tale of two economies

Regional differences in GDP per capita, productivity, employment and poverty in Lithuania are among the largest in the OECD, and they have increased over the last decade. The country still recovers from the legacy of the Soviet planning system which aimed at balanced geographical distribution of industrial activity and left many unviable firms and jobs particularly in rural areas. Unemployment is high in many regions, while mobility of excess labour towards economically stronger areas remains insufficient. Some regions feature "surplus infrastructure", while others lack investment. This paper looks at potential reasons for persisting disparities and assesses recent policy initiatives to reduce them. Stark gaps in education outcomes between rural and urban areas should be addressed, mainly by reorganising the municipal school network and by fostering firm-based learning, i.e. apprenticeships. The digital infrastructure is weak in rural regions and should be strengthened to allow access to high-quality jobs in all parts of the country, including through teleworking. Housing supply in economically strong areas should be increased, while urban sprawl should be avoided. Finally, municipal governments should be given more fiscal power, while the planned functional regions should help foster inter-municipal coordination.

English

Keywords: regional productivity, Lithuania, fiscal decentralisation, regional infrastructure, regional development, labour mobility, education
JEL: J65: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Unemployment Insurance; Severance Pay; Plant Closings; D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; J24: Labor and Demographic Economics / Demand and Supply of Labor / Human Capital; Skills; Occupational Choice; Labor Productivity; J61: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Geographic Labor Mobility; Immigrant Workers; O31: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Innovation and Invention: Processes and Incentives; H70: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Government; Intergovernmental Relations: General; I24: Health, Education, and Welfare / Education and Research Institutions / Education and Inequality
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