Between 1998 and 2004, Latvia achievedsubstantial progress in poverty reduction, with an estimated325,000 people moving out of poverty over this period. Thisreport examines the extent and causes of poverty reductionduring this period using data from a variety of sources, thenational accounts, as well as household budget, labor force,and other household surveys. The report is divided into foursections; Chapter 1 summarizes recent economic developments.It reviews key changes in the Latvian economy over the pastdecade. It addresses growth trends at the sector level,summarizes changes in income and consumption, and identifieskey labor market developments experienced by Latvia inrecent years. Chapter 2 examines trends in poverty andinequality, and provides a poverty profile. It uses datafrom the household budget survey series to shed light onrecent trends, and strives to resolve the apparent puzzle ofwhy Laeken poverty indicators show no decline in poverty.The chapter also summarizes the main correlates of poverty,and elaborates on what explains differences in welfarestatus among different groups. Chapter 3 analyzes the maindeterminants of employment and earnings. It draws upon datafrom the labor force survey series, as well as from a recentrepresentative survey of employees conducted in 2005 toexamine the links between language skills and earnings.Finally, chapter 4 examines targeting effectiveness ofvarious social assistance programs using data from the 2004HBS. In particular, the analysis focuses on the coverage,adequacy, and targeting efficiency of the various transferprograms in operation (pensions, state social securitybenefits, local government assistance benefits, and statesocial benefits).
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