The Framework of Trade in the Council for Mutual Economic Assistance

This paper establishes an overview of the variables and constraints that affected trade in the Council for Mutual Economic Assistance. It explores the origins of COMECON, the demographic and resource distribution of the member nations, and the role of trade in a centrally planned economy. The paper’s primary focus is on the emergence of a bilateral trade structure, the faulty price mechanism, and the nonconvertibility of currencies. The paper documents the origins and relationships between the constraints of trade within COMECON, and argues that ultimately, these constraints prevented COMECON from fully achieving its economic objectives.

The Effects of Trade Orientation and Human Capital on Total Factor Productivity

We study the effects of trade orientation and human capital on total factor productivity for a pooled cross-section, time-series sample of developed and developing countries. We first estimate total factor productivity from a parsimonious specification of the aggregate production function involving output per worker, capital per worker, and the labor force, both with and without the stock of human capital. Then we consider a number of potential determinants of total factor productivity growth including several measures of trade orientation as well as a measure of human capital. We find that a high degree of openness benefits total factor productivity and that human capital contributes to total factor productivity only after our measure of openness passes some threshold level. Before that threshold, increases in human capital actually depress total factor productivity. Finally, we also consider the issue of convergence of real GDP per worker and total factor productivity, finding more evidence of convergence for the latter than for the former.