An assessment of the likely impact of the liberalization of the Soviet economy on Soviet patterns of trade

Alexander Kumi

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The purpose of this study was to assess the impact of an economic transition from a centrally planned to a market economy on Soviet trade patterns. The Heckscher-Ohlin model, which is a standard general equilibrium model in international trade that predicts the patterns of trade based solely on resource endowments was used for this study;The Heckscher-Ohlin theorem, which is the core of the model states that a country will export the commodity which uses relatively intensively the factor which is relatively abundant in that country. Vanek's 1968 contribution to the Heckscher-Ohlin theorem, in which he referred to the factor services embodied in the goods traded, has made the model useful in empirical work. The ensuing Heckscher-Ohlin-Vanek linear equations are a set of relationships among industry factor requirements, international trade in commodities, and excess factor endowment supplies;To use these equations to predict Soviet trade patterns, data for Soviet resource endowments, U.S. technology matrix, and resource endowments for 45 countries considered as the rest of the world were used. Data for dollar/ruble exchange rate and the GNP were also required for the model simulation;The Heckscher-Ohlin-Vanek model predicted that Soviet patterns of trade will change most significantly in agricultural commodities after economic liberalization. The Soviet Union will move from a negative to a positive trade balance in this category. According to the model, the trade patterns do not change much in primary products and manufactures after a market economy is developed;The impact of economic liberalization on Soviet agricultural trade patterns was also examined. The model predicted that the Soviet Union will become a net grain exporter. The Soviets will export wheat and barley and import corn, oilseeds, and meat.

Date: 1992-01-01
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