Abstract

This chapter examines the evolution and current status of living standards and welfare following a decade of transition in seven of the poorest countries of the former Soviet Union (the CIS-7). At independence, the CIS-7 countries inherited high levels of human capital. Education and health care were universal and provided free at the point of delivery, and there were extensive social services and transfers. High social spending was supported by large budgetary transfers from Moscow. In the late 1980s and early 1990s, such transfers were worth as much as a third of gross domestic product (GDP) in Armenia and more than a fifth in Moldova.1 However, the republics of the Soviet state inherited economic structures that were heavily dependent on Soviet supply and trade networks. The Russian Federation was the main source of inputs and the main market for outputs. Transport and other infrastructure were designed with a view to meeting these trade needs and not necessarily those of the local economy.

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