Growth and convergence in Eastern Partnership and Central Asian countries since the dissolution of the USSR—embarking on different development paths?

Abstract

Background: Since the dissolution of the USSR, the former Soviet countries not included in the enlargement of the European Union (EU) have experienced divergent development. While the so-called Eastern Partnership (EaP) countries established closer ties with the EU, the Central Asian (CA) states mostly gravitated towards Russia and China. Thus, despite belonging to a similar economic and political system, the two groups of countries pursued transition to a market-oriented economy and fostering development with varying results, creating a neat contrast to facilitate the study of patterns of growth and disparity. Purpose: Based on an analysis covering more than two decades, the article explores the growth paths of the EaP and CA countries. Given their bumpy economic performances, the article aims, first, to show how these affected economic disparities among them. Second, it aims to identify the factors which most influenced different development trajectories. Approach and methods: Through analysis of panel data, the article seeks to explain long-term economic growth in terms of endowments of production factors, macroeconomic stabilization and transition reforms, external conditions and institutional development. Sources of growth are identified to reveal how they affected income per capita and shaped convergence in the two groups of countries. Findings: The EaP and CA countries show different growth patterns since the end of communism. While the EaP economies shrank more during the 1990s compared to the CA group, they bounced back faster during the 2000s. The EaP economies, being more closely connected to the EU, were more affected by the Great Recession of 2007-2009 than those of the CA. Overall, economic disparities between these sets of countries have slightly increased. Physical capital, foreign direct investment, natural resources, openness to trade and the transition reforms significantly explain economic 2 of 30 | INCALTARAU eT AL. | INTRODUCTIONAfter the dissolution of the Soviet Union, the post-Soviet countries not included in the enlargement of the European Union (EU) have experienced different regional contexts of transition and development. While the Eastern Partnership (EaP) countries established closer ties with the EU, 1 the Central Asian (CA) states mostly gravitated around Russia and China. 2 The two groups of countries share some common in-group features which have distinguished themselves from other parts of the former Soviet Union, but, at the same time, they have displayed contrasting evolutions, depending on the regional context in which they are located.On the one hand, the five CA republics have inherited a landlocked geographic location, at the heart of Eurasia, in the proximity of such regional powers as Russia and China. In general, the Soviet experience has largely shaped the CA countries. First, under the USSR, CA started a long journey to statehood which is nowadays closely connected to an unresolved debate, namely whether the Soviet transformation of CA was a neocolonial or a modern...

The Sustainability of International Trade: The Impact of Ongoing Military Conflicts, Infrastructure, Common Language, and Economic Wellbeing in Post-Soviet Region

“…Opening to the world redirected parts of international trade flows from the post-Soviet region to western countries, China, and others [15,54,55]. The economic downturns caused by the disruptions of the 1990s further decreased purchasing power in some countries leading to a relative decrease (in absolute value or in the rate of growth) of local demand for foreign goods.…”