Working Paper: CEPR ID: DP2641
Authors: Jan Fidrmuc; Jarko Fidrmuc
Abstract: The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.
Keywords: disintegration; gravity model; international trade
JEL Codes: F13; F15; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| disintegration (Y40) | trade flows between Czechoslovakia and the Soviet Union (P33) |
| disintegration (Y40) | trade flows between Slovenia and Croatia (F10) |
| disintegration (Y40) | decline in trade intensity across former federations (F15) |
| historical and cultural ties (N95) | persistent trade intensity post-disintegration (F12) |
| economic and political context (P29) | bilateral trade intensity (F10) |