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Journal of Economics and Management Research University of Latvia Faculty of Economics and Management Journal of Economics and Management Research Founded in 2001 as Acta Universitatis Latviensis, series “Economics. Business Administration” Volume 4/5 Rīga 2016 Journal of Economics and Management Research, Volume 4/5. Riga: University of Latvia, 2016, 176 pages. The Journal of Economics and Management Research is an interdisciplinary scientific journal in the field of economics, business management, national economy, structural and social policies, innovation perspectives and institutional capability. The Journal of Economics and Management Research, a Scientific Journal of the University of Latvia, is published once per year. General Editor – Assoc. prof. Dr. Viesturs Pauls Karnups EDITORIAL BOARD Prof. Dr. Signe Bāliņa, University of Latvia Prof. Dr. Jean David Avenel, Paris-Est Creteil (Val de Marne) University (France) Assoc. Prof. Dr. Džineta Dimante, University of Latvia Prof. Dr. Gundars Kaupins, Boise State University (USA) Prof. Dr. Natalia Kuznetsova, St. Petersburg University (Russia) Prof. Dr. Kristina Levišauskaitė, Vytautas Magnus University (Lithuania) Prof. Dr. Barry Lesser, Dalhousie University (Canada) Prof. Dr. Nikolay Nenovsky, University of Picardie Jules Verne (France) Prof. Dr. Josef Neuert, University of Applied Sciences Kufstein (Austria) Prof. Dr. Tiiu Paas, Tartu University (Estonia) Prof. Dr. Gunnar Prause, TSEBA/Tallinn University of Technology (Estonia) Prof. Dr. Arild Sæther, Agder Academy of Sciences and Letters (Norway) Prof. Dr. Bruno Sergi, Messina University (Italy) Prof. Dr. Biruta Sloka, University of Latvia Prof. Dr. Baiba Šavriņa, University of Latvia Prof. Dr. Ligita Šimanskienė, Klaipeda University (Lithuania) Prof. Dr. Ērika Šumilo, University of Latvia Assoc. Prof. Dr. Kamil Zajackowski, University of Warsaw (Poland) Assoc. Prof. Gundars Bērziņš, University of Latvia Prof. Dr. Margarita Dunska, University of Latvia Journal is available: http://www.lu.lv/apgads/izdevumi/elektroniskie-izdevumi/ zurnali-un-periodiskie-izdevumi/journal-of-economics-and-management-research/ Layout: Andra Liepiņa Cover design: Agris Dzilna © University of Latvia, 2016 ISSN 2255-9000 TABLE OF CONTENTS From the Editor 4 Ieva Braukša Political Aspects of Economic Development in Latvia 5 Aleksandrs Dahs Measuring the Impact of Spatial Factors in Regional Demographic Development of Latvia 15 Milda Damkuvienė, Sigitas Balčiūnas, Evandželina Petukienė Client Perceived Participation Value: Conjoint Analysis 29 Rasa Daugėlienė Nature of Trade Policy Between Lithuania and Russia: a Study on the Application of Trade Barriers in the Period of 2007–2014 41 Elena Dubra, Kristaps Soms Evaluation of Social and Economic Convergence of Latvia to the EU-28 Level 60 Edgars Rožāns The Impact of Economic Freedom on the Attraction of Foreign Direct Investment in the Baltics 74 Inga Jēkabsone, Biruta Sloka Methodology of Measurement of Objective Well-Being in Municipalities, the Case of Latvia 96 Baiba Zvirbule Analysis of Accounting Regulatory System in Latvia 112 Viesturs Brālis What’s inside of Knowledge Management Effectiveness? 127 Juris Baldunčiks Diffusion of Innovations and its Forecast for E-Signature in Latvia 145 Diāna Arāja, Kārlis Krūzs Resources of Health Care Financing in Latvia: Historical Review and Eventual Changes 159 The Authors 172 FROM THE EDITOR Dear Reader, The Journal of Economics and Management Research is under new management with a new General Editor and Editorial Board. This is a double issue to catch up the missing year, but we hope that beginning from next year we will be able to publish at least one issue per year. Most of the authors are PhD students and we encourage articles both from established academics, as well as prospective academics. We are looking forward to an exciting 2017 and hope for your support in making this Journal a leader in its field. Best wishes Viesturs Pauls Karnups General Editor POLITICAL ASPECTS OF ECONOMIC DEVELOPMENT IN LATVIA Ieva Braukša Journal of Economics and Management Research. Vol. 4/5, 2016: 5-13 POLITICAL ASPECTS OF ECONOMIC DEVELOPMENT IN LATVIA1 IEVA BRAUKŠA Abstract This article explains political business cycle theory and political factors that could affect economic development. It introduces results of previous research for the case of Latvia and seeks for the explanation and insight on the action appropriate to the theory and possibility to apply it for the situation in Latvia. This article uses European values Study data, which is a cross-national and longitudinal survey aimed at understanding human value system and beliefs all over Europe. In the study there is an ongoing discussion on how decisions and actions of the politicians have influenced people’s trust and attitude towards them and how this can be partially explained by political business cycle theory. Keywords: Latvia, political business cycles, public attitude, European Value Study, elections JEL code: D72, D78, E32 INTRODUCTION Economic development is considered as one of the key objectives for any country, and several factors exist which influence it. Firstly, options to increase national wealth must be mentioned, which are dependent on the current situation in the country. A lower starting point can become an obstacle for further development, but at the same time there are more options to increase national wealth without investing enormous resources. Latvia is defined as one of the former post-Soviet space countries. Although each of these former Soviet Union countries is different, they all have something in common – which to a greater or lesser extent is expressed as the Soviet legacy. It should be noted that society’s lack of confidence in political forces and often negative attitude towards politics could be one of these characteristics – the author will take a closer look at this hypothesis in the case of Latvia, involving slightly also data about the other Baltic States. Also recent results regarding the dissolution of the 10th parliament which took place on 23 July 2011 indicate people’s frustration with the politicians. 94.3% voted in favour of dissolving the parliament (data by The Central 1 This work has been supported by the European Social Fund within the project “Support for Doctoral Studies at University of Latvia”. 6 POLITICAL ASPECTS OF ECONOMIC DEVELOPMENT IN LATVIA Election Commission of Latvia). Further in the work political factors affecting the economic development will be discussed, as well as European Values data analysed (European Values Study, 3rd and 4th survey data phase). It will be done to get an overall impression of people’s attitude towards policy makers, which could partially explain the current social and economic development problems. The data of this research provides a specific insight and allows better understanding of issues of people’s attitude and will be used to evaluate the possible reasons behind the cyclical behaviour in the budgets of municipalities found in previous research. The aim of this article is to summarise information regarding political business cycles and channels of political influence transmission to economic development, particularly analysing changes in voter trust in politicians over different time periods. In this research a literature review and analysis, as well as statistical analysis of European Value study data was used to discuss the electoral cycles and political factor influence on the real economy. PREVIOUS RESEARCH AND POLITICAL BUSINESS CYCLE THEORY Political, economic and social developments are closely related to each other. When in a country there is improvement in one of these areas most often improvements in remaining areas can be observed. Politics influence economic and social development in a number of ways, they can vary greatly. Some of the most important ways which need to be distinguished are as follows: 1) Development of organised justice system’s structure; 2) Allocation of resources to various activities and areas; and 3) Setting targets for economic and social development. As political decisions can affect not only laws and regulations, but also allocate funds for various purposes, therefore political aspects play an important role in social and economic development. Nevertheless several authors (Rose, 2006) believe that fiscal rules can limit politicians’ options to make decisions that are favourable to them. In 2011 in Latvia general government expenditure accounted for 39.1% of GDP (Report on the Economic Development of Latvia 2011). This means that even during the economic recession public spending still played an important role even when it was reduced. According to Inglehart’s Modernisation and Post-modernisation approach (Inglehart, 1997), economic development, changes in culture and politics are closely related and to some extent predictable. Therefore the question arises – if politics plays such a major role in social and economic development, isn’t it so that just a few people from the elite are resolving issues important to the whole society? Discussion on the elite issue theory was pioneered by such authors as G. Tosca, V. Pareto and R. Michel at the end of 19th and in the early 20th century. Of course, in case of democracies one can say that the elite represent the whole nation, Ieva Braukša 7 and therefore through the ballot box all voters can decide which political force they wish to see at the forefront of the country. Some evidence to substantiate political influence on economic development in different European countries
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