This study explores disparity in regional development in Russia and in Canada and role of geography in their development. In the first chapter analysis of the role of geographic, economic, and institutional factors in economic growth over 1996-2004 is presented. Additionally the issue of the interregional spatial interaction is analyzed, which is studied in the framework of the new economic geography. The second chapter devoted to the development of Canadian provinces and analyzes factors of provincial differences along with factors of migration in Canada over the period of 1991-2001.

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Repeated economic reform efforts since 1985 have not improved the material well-being of the average Russian; the decline in GDP since 1991 has been greater than that in the United States during the Great Depression. Since the beginning of the Gorbachev era, per capita consumption has fallen for all food products, with the exception of bread and potatoes. Poor nutrition has contributed to poor health and a rising death rate. A decline in the birthrate also is attributed, in part, to declining living standards.

Since the breakup of the USSR, the South Caucasus with the CIS countries and politically friendly neighbors, region has experienced a range of political conflicts, but too little with the European Union, the United States, resulting in a number of hot and cold wars and border and hostile neighbors. Lifting the blockades would closures. Polyakov analyzes the probably short-term alleviate trade distortions and bring about short-term impacts of peace in the region as a result of a resolution improvements, including: of the conflict between Armenia and Azerbaijan over the * More rational trade flows. Nagorny Karabakh region and an end to the associated * A resumption of (or an increase in) regional trade in trade blockades, with an emphasis on Armenia, major commodities such as energy. Azerbaijan, and Georgia.* Lower prices or higher profit margins (or both) on The conflict has seriously distorted trade flows in the some important consumption and production goods. region, disrupted transport routes, and stifled export and With peace, Armenia could more than double its import opportunities for Armenia and Azerbaijan.exports if Azerbaijani and Turkish markets open, which Georgia has enjoyed higher-than-normal transit through could reduce Armenia's trade deficit by a third to a half its territory. Trade has stopped in gas (from Azerbaijan and increase its GDP by 30 percent. Improving transport to Armenia) and electricity (from Armenia to Turkey).routes would produce immediate savings and relieve Transport tariffs are unusually high, aggravated by pressure on domestic prices, especially for energy. government-imposed transit fees (taxes).Azerbaijan could increase its exports by $100 million, Over time, trade restrictions have eased and trading or 11 percent of 1999 levels, reducing its trade deficit by partners have found ways to conduct trade despite closed a quarter and raising its GDP by 5 percent. Its exports borders and blockades-but at a cost. and imports would benefit from transport savings. Applying a gravity model to regional trade, Polyakov Transit through Georgia might decline, but probably concludes that South Caucasus countries trade enough not by more than a quarter of the freight service surplus.This paper-a product of Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regionis part of a larger effort in the region to explore growth prospects in the CIS economies. Copies of the paper are available free from the World Bank,

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