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Transition and international integration in eastern Europe and the former Soviet Union

  • Ian Babetskii

    (European Bank of Reconstruction and Development)

  • Oxana Babetskaia-Kukharchuk

    (Research Center on Transition and Development Economics (ROSES) in Paris and the State University - Higher School of Economics in Moscow)

  • Martin Raiser

    (European Bank of Reconstruction and Development)

This paper investigates the extent of integration of the transition economies into the world economy. We find that south-eastern Europe (SEE) and the Commonwealth of Independent States (CIS) trade significantly less with the world economy than the accession countries. We use a gravity model to explain why this is the case and conclude that the low quality of economic institutions in the CIS, and hence the high risks associated with trade, explain a considerable proportion of the “trade gap” compared to trade levels in industrialised countries. Moreover, the landlocked nature of many CIS countries (and hence high costs of transport and transit) is another reason for the lack of integration. In SEE these factors play a lesser role and the gravity model is unable to fully explain the lack of integration, which we suggest is a legacy of the region’s recent turbulent past. The paper suggests that a combination of improved market access to western markets and efforts to reduce trade and transit barriers within the region provide the best hope to increase economic integration with the world economy in the future.

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Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 83.

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Length: 29
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:ebd:wpaper:83
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  1. Koukhartchouk, Oxana & Maurel, Mathilde, 2003. "Accession to the WTO and EU Enlargement: What Potential for Trade Increase?," CEPR Discussion Papers 3944, C.E.P.R. Discussion Papers.
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