Integration: An Empirical Assessment of Russia

Abstract

In the process of implementing market reforms, many post-socialist countries have struggled to preserve economic and political integration. Using a statistical model of commodity trade, we quantify the evolution of economic integration observed among regions within Russia during 1995-1999, and then explore potential determinants of the patterns of integration we observe. Our measure of integration exhibits rich regional variation that, when aggregated to the national level, fluctuates substantially over time. In seeking to account for this behavior, we draw in part on theoretical models that emphasize the potential role of openness to international trade, regional disparities in income, and inflation volatility in threatening economic and political integration. Controlling for a host of additional regional and national level variables, we find a strong negative correspondence between openness to international trade and internal economic integration within Russia. We also find negative links but weaker links between integration and regional-income disparities and inflation volatility.

Keywords: openness to international trade, regional income disparities, inflation volatility, economic and political integration

JEL Classification: P22, R1