September 4th, 2018

Geography, geopolitics, and policy in the performance of transition economies

Economics & Politics

“Geography, geopolitics, and policy in the performance of transition economies” in Economics of Transition, Volume 26, Issue 4: Special Issue on the 25 Years of Transition – A Symposium at the Stockholm Institute of Transition Economics, pages 841-849.

The economic performance of the transition economies as of 2015 is well explained by three variables: (1) years of membership in the EU; (2) physical distance from the heart of the EU economy, taken to be Dusseldorf; and (3) annual revenues from oil and gas production, reflecting natural resource deposits. These three factors account for around 86 percent of the variation in per capita income across the 28 transition economies, and reflect the interplay of domestic policy, geopolitics, geography and natural resources…

My contention is that the pattern of EU and NATO enlargement has created a new and unnecessary economic and security divide in Europe. Of the 28 transition countries considered in this paper, 12 have acceded to NATO and 11 to the EU (Albania being the single transition country admitted to NATO but not yet to the EU). While some of the transition economies, such as those of Central Asia and the Caucasus, are too remote from Europe to be viable candidates for EU membership (and indeed, are not even in the European region), several other countries in the for- mer Yugoslavia and former Soviet Union are plausible candidates for EU member- ship. Instead of defining a Common European Home, the expansion of the EU and NATO has unnecessarily divided the transition states between those that are ‘inside’the Western security umbrella and those that are deemed to be competitor states on the outside. The economic consequences of this division have been significant, several thousand dollars of per capita income as of 2015.

Read the full article in Economics of Transition here.


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