Estimates of the Effects of CMEA Integration

Abstract

As one would expect, there is a paucity of studies in English on the effects of the economic integration of the Council for Mutual Economic Assistance (CMEA — see Chapter 7). The reason is that economic integration between centrally planned economies is pursued through joint investment/project planning within the context of promoting industrialisation and bilateral international trade in a situation of acute shortage of foreign currencies rather than through a market mechanism that promotes freer trade between the partners. As is discussed in Chapter 7, this process may actually lead to a decrease in intra-bloc trade, rather than to an increase. This chapter deals with the two main studies, which represent different frameworks, in order to provide some notion of the work carried out in this area. The first study is by Pelzman (1977) and the second is by Drabek and Greenaway (1984). It should be pointed out, however, that Pelzman (1978) carried out similar estimates for the USSR using a similar methodology to Drabek and Greenaway’s, but because the work of the latter is much wider, Pelzman’s analysis is not discussed here, though his results are compared with theirs.