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Does political disintegration lead to trade disintegration?

  • José de Sousa
  • Olivier Lamotte

Recent studies have found that political disintegration is a cause of severe and rapid trade disintegration in former Eastern European countries. This finding somewhat conflicts with another strand of the literature highlighting the fact that trade patterns change relatively slowly. This article aims at reconciling the apparent inconsistency between these two results. Using a theoretically grounded gravity equation, we evaluate the intensity of trade between successor states of three former countries (Czechoslovakia, the Soviet Union and Yugoslavia) in the period 1993-2001. We find no clear evidence that political disintegration leads to systematic and severe trade disintegration. This result is consistent with the patterns displayed by using simple descriptive statistics, is robust to sensitivity checks, and supports the idea of hysteresis in trade. Copyright (c) 2007 The Authors Journal compilation (c) 2007 The European Bank for Reconstruction and Development .

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Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 15 (2007)
Issue (Month): (October)
Pages: 825-843

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Handle: RePEc:bla:etrans:v:15:y:2007:i::p:825-843
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