The terms-of-trade effects from the elimination of state trading in Soviet-Hungarian trade

Trade Performance and Policy in the New Independent States

“…First, due to the pattern of CMEA pricing, numerous studies empirically demonstrated that the aggregate FSU would experience a terms of trade gain in its trade with the Central and Eastern European countries and other countries in the CMEA after the CMEA breakup of 1991. (See, for example, Marrese andVanous 1983 andOblath and Second, countries that imported energy and raw materials ("hard' goods) and exported machinery products ("soft" goods) within the FSU had a reversed commodity composition of trade on the trade external to the FSU. Thus, their overall terms of trade loss was slightly less than the estimates of table 4.…”

The return on social bonds

“…11 Oblath and Tarr (1991) and Rodrik (1992) find that, in contrast to previous expectations, the Soviet Union actually subsidized trade with Communist states in Eastern Europe by offering them favorable terms-of-trade. In addition, the USSR further encouraged trade among the members states of the Warsaw pact (Rodrik, 1994;Rosati, 1994).…”

“…This dissertation's theory contributes to our understanding of sovereign theft by arguing that the probability that a state opts for illiberal practices is inversely related to its degree of subordination to a dominant state. While a dominant states, such as the USSR or France under Napoleon III, may not advocate liberal economic policies generally, they do prefer the free flow of goods or capital between themselves and the closest members of their hierarchy (Mitchener and Weidenmier, 2008;O'Brien and Pigman, 1992;Oblath and Tarr, 1991). 11 More specifically, I argue that investors estimate the risk of a state's potential to expropriate foreign assets by examining the observable indicators of a state's hierarchical location (e.g., trade dependency and type of exchange rate) with reference to the economic policies of a dominant state.…”

“…Though most studies of economic hierarchy focus on the benefits of free trade to the international system (e.g., Kindleberger, 1973), a dominant state does not have to pursue free-market capitalism in order to offer more open trade as an economic advantage of hierarchy to subordinate states (Conybeare, 1987;Krasner, 1976 (Mitchener and Weidenmier, 2008;O'Brien and Pigman, 1992;Oblath and Tarr, 1991).…”

“…The Soviet Union, for example, actually subsidized trade in order to validate the superiority of their economic model and gain support from subordinate governments (Marrese and Vanous, 1983). That the terms-of-trade between satellite states and Russia became negative following the end of the Cold War provides some evidence that the USSR subsidized bilateral trade with its Eastern bloc allies (Oblath and Tarr, 1991;Rodrik, 1992). In addition, there is also evidence that the USSR provided incentives that encouraged trade among the Warsaw pact members (Rodrik, 1994;Rosati, 1994).…”