We assess deep integration in the Eurasian Economic Union (EAEU) through the reduction of time in trade costs, the reduction of non-tariff barriers in goods and the liberalization of barriers against foreign suppliers of services. We develop an innovative multi-region model of trade and FDI for preferential trade analysis where we incorporate Dixit-Stiglitz endogenous productivity effects from trade and FDI liberalization. This model produces important differences compared with a perfect competition model. We build on numerous surveys and econometric estimates of the trade and FDI barriers in our focus countries that we helped develop.We show that if the EAEU effectively implements its objectives for trade cost reduction, it would lead to significant welfare gains of between 0.8 to 4.8 percent of consumption, depending on the country. If these deep integration measures are extended to third countries, either by a wider liberalization effort or by spillovers, then the estimated welfare gains increase between 2.5 and 4.5 times for Belarus, Kazakhstan and the Russian Federation. Using the neoclassical model of labor migration, we estimate that the right to legally work in the Russian Federation is approximately of equal value to Armenia as the combined aspects of the reduction of trade costs, including FDI liberalization. Our estimates show that all the spillovers are beneficial to all the EAEU countries. Among the various reforms under consideration, we identify which reform is most important for each EAEU member country; and we identify whether the European Union, China or the United States is the most important external region for each member country if the reforms are extended to third countries.assumption. We are the first to provide estimates of these trade costs impacts for the EAEU countries with and without spillovers to third countries. We also contribute to the literature by providing an estimate of the free movement of labor, where we employ the well-known neoclassical model of labor migration. Key ResultsOur results for our central (basic) scenario of EAEU integration shows significant gains ranging from 0.8 percent of consumption for the Russian Federation to 4.8 percent of consumption for Armenia. If the measures to reduce trade costs and liberalize barriers against FDI in services are extended to third countries, either by a wider liberalization effort or by unavoidable extension of benefits (called "spillovers"), then the estimated gains increase to between 3.6 and 7.2 percent of consumption, depending on the country. The importance of spillovers is especially true for FDI liberalization. The significantly larger gains from wider liberalization or spillovers reflects the fact that the five EAEU countries collectively have only 2.2 percent of world GDP in 2017. The estimated gains are significantly smaller with our perfect competition model, which shows the importance of incorporating the endogenous productivity gains from trade and FDI liberalization in services.Since remittance income is very impor...

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The paper is devoted to the analysis of development prospects and problems of Eurasian Economic Union (EAEU) of Russia, Kazakhstan, Belarus and Armenia. It considers integration problems inside EAEU, interactions of EAEU with other CIS countries and with countries from the rest of the world. The paper shows that the major integration challenge inside EAEU is the domination of the redistributive motive over the creative one. It estimates the value of the oil and gas transfer from Russia to other EAEU members and the influence of the Russian tax maneuver on this transfer. The paper shows the need in redistribution mechanism inside EAEU as a necessary condition for getting the potential positive economic effects of free trade with other countries. It also assesses the risks for EAEU due to Russian embargo for food imports from countries of the sanctions list and possible application of tariff in the trade with Ukraine.

We investigate mechanisms of budget expenditures structure influence on economic development. General government fiscal multiplier in various functional directions is estimated. We show that productive expenses in general have bigger multiplicative effect on GDP, than unproductive ones. By means of multiplicative effects models estimation for various functional items we calculate potential effect on economic growth of the budget maneuver in favor of productive expenses and the implemented effect of the recent years budget expenditures structure change. We show that resources redistribution from non-productive expenses to productive ones could increase long-term rates of economic growth approximately by 0,8 p. p. per year. On the contrary, the budget expenditures structure change observed during 2011-2017 has a negative impact on average annual rates of economic growth about 0,3 p. p. per year.