Beyond borders-Reconsidering regional trade in Central Asia

This paper investigates the barriers to trade in Central Asia. While much of the existing literature on international integration of FSU countries has focused on the quantities traded, we use relative prices to shed some light on impediments to trade. We find that the impact of borders on price variations across different locations in Central Asia is much smaller than conventionally thought. While prices vary significantly across the region, variations within one country are just as large as variations across countries. We hypothesise (although we cannot prove) that this is due to obstacles to trade, and in particular rent seeking by enforcement agencies at the numerous internal check points. The paper also confirms that in relative terms, the borders with Uzbekistan are considerably more difficult to cross than those with Kazakhstan or the Kyrgyz Republic. Journal of Comparative Economics 36 (3) (2008) 453-466. Union de Banques Suisse (UBS), London, UK; The World Bank Ukraine, Ukraine; EBRD, London, UK. (C) 2008 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.