Structural change in the Russian far east: The implications for trade and factor markets

This study compares actual directions of structural adjustment in the Russian Far East since the collapse of the former Soviet Union with estimated directions of adjustment that would be predicted to follow an opening of the region to the world market. How would moving to world prices affect the competitiveness of individual sectors of the Russian Far East? This author estimates the impact of changing terms of trade by revaluing a 1987 input-output table for the Russian Far East by price relatives between internal Soviet prices and world prices estimated by David Tarr [1992]. These estimates measure apparent competitiveness of each sector at world prices and identify four sectors of the Russian Far East—food processing, forest products, light industry, and the chemical industry—as negative value added sectors at world prices. However, actual short-run directions of adjustment in 1992–94 are only partly consistent with the directions predicted in the model. Measured gains from trade are strong on the import side but not on the export side.