Socio-Economic Situation in Latvia's Municipalities in the Context of Administrative-Territorial Division and Unexpected Impact of COVID-19

Introduction

The COVID 19 pandemic not only influenced the health of the population, tested the efficiency of national health care systems and spotlighted the weaknesses of these systems, but also revealed significant changes in the models of human behaviour. In the framework of this research, the authors analysed how the behaviour of people changed in various phases of the pandemic and how these changes affected the economic activity in municipalities, taking into consideration significant changes in people’s habits and employment conditions. The pandemic coincided with the Administrative-Territorial Reform (ATR) in Latvia, providing a unique opportunity to test and ascertain in a single research both the above-mentioned changes in the economic activity of inhabitants and the viability of the new administrative-territorial division vis-a-vis the new reality. Therefore, the objective of the research was to examine how the

COVID-19 pandemic has influenced the behaviour and the economic activity of people (unloading the capital city, Riga, and increasing activity in the regions and rural areas of Latvia) in terms of whether the new territorial division has increased the economic and social equality among municipal territories throughout the country.

The pandemic has created favourable conditions for remote work and proved that working from home can significantly improve the epidemiological situation. By that creating new social environment for social consensus and dialogue, which requires reconsider approaches to its analysis (Shin, 2016). However, there are jobs, which cannot be performed remotely with sufficient efficiency, and the distribution of jobs that can be performed remotely are unevenly dispersed across municipalities (Fadinger & Schymik, 2020). Situation in Latvia was different, as the majority of inhabitants not only chose to work from home but also changed their place of residence, moving from economic activity centres to areas, which traditionally have been associated with recreation. In 2020, the authors observed a significant decrease of activity in the traditional centres of economic activity and a notable increase in their surrounding areas. This situation allowed us to test the assumption that by significantly activating the business environment, the municipalities surrounding bigger cities could ensure higher economic activity after the pandemic.

Minimisation of socio-economic inequality (difference between municipalities compared by a set of socio-economic indicators) is the aim of the ATR and a significant prerequisite for improving the general welfare of the country. It is also an important aspect for long-term social security and political stability of the state, with the need for development strategies tailored for specific municipal territories (Rodríguez-Pose, 2018). Discussions on the need for administrative-territorial reform began immediately after the restoration of independence of Latvia in 1991. However, the first ATR after the restoration of independence was only implemented in 2009. The aim of the reform was to create economically self-sufficient local governments that would ensure the provision of quality services to the population. As a result of the 2009 ATR, there was a transition from two levels to one level of local government: 26 district councils were abolished, but cities, their rural territories and parishes were merged into 119 counties, and 9 large cities gained the status of republican cities. But already in 2015, the Ministry of Environmental Protection and Regional Development of Latvia encouraged to significantly reduce the number of counties again. One of the proposed options was to reduce the number of counties to 49, preserving 9 cities of national importance.

At the beginning of 2019, the Cabinet of Ministers of Latvia adopted a declaration envisaging the implementation of local government reform by 2021, merging administrative territories into more sustainable and economically stronger units, modeling the development plan of Pieriga municipalities separately. The initially prepared ATR reform project envisaged reducing the number of counties from 119 to 35, thus the new map of counties and parishes was largely similar to the former map of districts of Latvia.

Latvia has chosen to implement its ATR in two phases – first, by defining the conditions for the development and equality of the new administrative units, and then by carving out detailed plans on how to tailor development strategies for individual municipal territories.