The role of forest biotechonomy industry in the macroeconomic development model of the national economy of Latvia: a system dynamics approach

Abstract

With a rapidly expanding global economic growth, issues of sustainability and potential impact on environment become more pressing. While it is clear that future growth should focus on more efficient exploitation of natural resources and higher added-value in processing of biological goods (referred to as biotechonomy), there is an avenue for future research investigating the role of biotechonomic sectors’ contribution to national economies. This research attempts to fill that gap.By using system dynamics, this research evaluates the role of Latvian forest biotechonomic industry in macroeconomic development model of the national economy of Latvia. In addition, research primarily focusses on three notable macroeconomic sectors – natural resource exploitation, education and healthcare. It is assumed that these, as well as other essential segments of national economies, are linked in an endogenous system, constantly reinforcing each other and being subject to certain causalities among them.For the purposes of investigation, a causal loop diagram and corresponding system dynamics model of the national economy of Latvia was developed. By introduction of forest biotechonomy in the national economic model, indicative results show that financial resources become more available for education and healthcare. Furthermore, biotechonomy introduction also reinforces further development of high-added value industries and general economic growth via productivity increase and prolonging of total working hours, based on health improvement. This is achieved while proportionally diminishing impact of growth on environment and generally decarbonizing traditional bio-economic sectors.