ABSTRACT
The eight countries of the Caucasus and Central Asia (CCA), which became independent from the former Soviet Union (FSU) in 1991, are experiencing a difficult transition toward a market economy. We now know that initial conditions are an important cause of this. The legacy of a long exposure to central planning is one important reason for the difficult transition (de Melo et al. 2001), and remoteness from dynamic market economies is another (Kopstein and Reilly 2000). This book explores the CCA transition by tracing the impact of a third key initial condition, namely the natural resource endowment. This third factor has been relatively neglected by the transition literature probably because that literature initially focused on the higherincome Central and East European (CEE) countries, for which the primary sector (and therefore natural resources) is relatively unimportant. But for the lower-income transition countries in the CCA region the primary sector remains large relative to GDP. Recent research on the developing market economies indicates that differences in the natural resource endowment affect the nature of the political state (Ross 1999; Auty and Gelb 2001) and the development trajectory in important ways (Sachs and Warner 1995 and 1997; Wood and Berge 1997; Auty 2001).
