Extending the Economics of Disorganization

Posted: 4 Oct 2001

See all articles by Paul G. Hare

Paul G. Hare

Heriot-Watt University; CASE, Warsaw

Alan A. Bevan

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Jon Stern

City, University of London - Centre for Competition and Regulatory Policy - Department of Economics

Abstract

Many of the states of the former Soviet Union have experienced a dramatic collapse of output during transition, which has not yet been reversed in a sustainable way. The economics of disorganization, proposed by Blanchard (1997) and tested empirically by Blanchard and Kremer (1997), reasons that this phenomenon can be explained by specificity of inputs and the breakdown of traditional domestic supply linkages. We replicate the Blanchard-Kremer study for Ukraine and Kazakhstan, and also find that longer and more complex domestic supply chains are associated with greater reductions in output. When we extend their analysis to incorporate measures of the complexity of the Commonwealth of Independent States (CIS) trade and non-CIS trade however, we find that complexity of non-CIS trade is the significant factor in explaining the output collapse. We therefore argue that the disintegration of the Council for Mutual Economic Assistance and the requirement of hard currency trade, are equally, if not more, significant in explaining the output declines experienced by Ukraine and Kazakhstan.

Keywords: former Soviet Union, disorganization, output, supply complexity

JEL Classification: P2, P33, C22, E23

Suggested Citation

Hare, Paul and Bevan, Alan A. and Estrin, Saul and Stern, Jon, Extending the Economics of Disorganization. Economics of Transition, Vol. 9, No. 1, March 2001. Available at SSRN: https://ssrn.com/abstract=264849

Paul Hare (Contact Author)

Heriot-Watt University ( email )

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CASE, Warsaw ( email )

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Alan A. Bevan

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist ( email )

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Saul Estrin

London School of Economics & Political Science (LSE) ( email )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jon Stern

City, University of London - Centre for Competition and Regulatory Policy - Department of Economics ( email )

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London, EC1V 0HB
United Kingdom

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