VOX  CEPR Policy Portal

While much has been written on why states disintegrate, we know little about the consequences of state breakup. Using data from the breakup of the Soviet Union, this column studies the short-run economic costs of its collapse. It demonstrates how political disintegration can lead to the dissolution of trade links, and to a correspondingly large fall in output. In the Soviet case, this mechanism helps to explain the disappointing performance of its successor states in the 1990s. The uncertainty surrounding secessions is an important driver of the fall in present output.