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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 Economics36 (3) (2008) 453–466.

Over the past decade and a half the trade regimes of the former communist countries have changed fundamentally, both in relation to the rest of the world and within the former communist block. While the liberalisation of trade relations with the non-CMEA (Council for Mutual Economic Assistance) countries has received considerable attention, less work has been done to investigate the dynamics and structure of trade patterns inside the former Soviet Union.

This paper presents an unexpected conclusion: national borders do not seem to add much to the variation in relative prices across different regions in Central Asia, at least compared to existing, within-country barriers to trade. At the same time, it appears that the within-country barriers to trade are significant and go beyond simple transport costs related to the distance between two locations. Rather, internal barriers to trade such as numerous roadblocks and attempts by local governments to restrict access to local markets and bazaars may be driving up price differences across regions to levels that are at least as high as differences across countries.