ABSTRACT
COVID-19 policy and measures have caused both negative and positive challenges for the transport sector. The aim of the research is to model an impact of shocks that transport and logistics encounter during the COVID-19 era on the economy and regional development. A comparative-static approach that involves an input-output model with additional regional modelling block and scenarios are applied. Two scenarios are estimated for Latvia’s economy: firstly, extremely dramatic decline in demand on air transport services by 90%;secondly, unexpected increase in demand for postal and courier services that doubled output. The results of the first scenario argue that the service sector is influenced more than manufacturing due to air transport collapse –rental and leasing services (-11.6%), employment services (-9.7%), other transport services (-7.0%), impact on manufacturing is relatively minor and only on certain branches. The results of the second scenario on doubled output in postal and courier services argue that there is a positive impact, but the scale is relatively low, the most affected industries are manufacturing (of paper products (increase by 1.7%), rubber and plastic goods (1.6%)). The findings confirm that the urban areas due to higher economic activity and larger service sector are more affected to the modelled shocks both negative and positive. The rural areas are relatively less negatively affected during the crisis, but at the same time, during the recovery (for example, in the post-COVID era) it may lead to weaker economic activity and the rural areas will continue to lag behind urban areas. © 2021, Latvia University of Life Sciences and Technologies. All rights reserved.