Report

Economic (Dis)Integration Matters: The Soviet Collapse Revisited

Johannes F. Linn

Abstract

This paper argues that the disintegration of economic space has been a significant factor explaining the economic collapse of the transition countries in Europe and Central Asia. While disintegration by no means has been the only factor behind this collapse, it has been neglected by most economists explaining the economic trajectory of the transition process. The evidence which the paper assembles in support of its hypothesis remains fragmentary. However, the author argues it is sufficient to make the case that disintegration has mattered and that neglecting it runs the risk of seriously misinterpreting an important recent historical event. It also risks placing blame for supposed failures of reforms which if anything have contributed significantly to ameliorating the negative impacts of disintegration and have set the stage for a lasting recovery. Nonetheless, there remains a major research agenda both at the conceptual and at the empirical level to sharpen and deepen the analysis advanced here. The paper also argues that economic reintegration of the region and integration with the rest of the world offer an opportunity for sustaining the recent strong recovery. In pushing forward with such reintegration the principal focus should be on lowering barriers to internal trade and transit and to internal mobility of labor, capital and knowledge within countries and within the region, while at the same time aiming at integration of the region with the rest of the world.

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