SYSTEM DYNAMICS MODELING OF KEY DETERMINANTS OF SOCIAL ECONOMIC DEVELOPMENT IN LATVIA

The continuous reduction and aging of population poses a serious threat to social economic development in Latvia. The consequence may be an imbalance of the social budget and the pension system, lack of human resources, reduction of business activity, etc., which has the potential to cause deeper economic and political crisis. Particular importance in this context takes early identification of nega-tive trends and development of adequate strategic decisions.Three hypothetical scenarios of social economic development in Latvia are generated using simulation model based on system dynamics methods. The novelty of research is the design of the model, range of selected factors and their structure, dependency between factors and time horizon. This made possible to calculate dynamics of population and its structure in dependence on GDP and average income.General trends for social economic development in Latvia are shown and several recommendations are offered. The research can be used for dynamic analysis in any specific field related to social economic development and demography. KEY WORDS:social economic development, population age structure, simulation model, scenario analysis