Download This PaperDying Light: War and Trade of the Separatist-Controlled Areas of Ukraine
78 Pages Posted: 13 May 2020
Date Written: June 28, 2019
Abstract
The paper investigates how war and the war-related government policies affected economic activity of the separatist-controlled areas of Ukraine. Using the unexpected outcome of the territorial expansion of the separatists in Ukraine, the paper estimates the impact of two events on the separatist-controlled areas: introduction of the separatist rule and trade restrictions imposed by the government of Ukraine versus the separatist-controlled territories in 2017. Using a difference-in-difference estimator that controls for the yearly, monthly, individual fixed effects, and region-specific time shocks, the study finds that the separatist rule decreased economic activity by 38% in Donetsk region and 51% in Luhansk region according to preferred specifications. At the same time, the trade ban introduced against the major industrial enterprises of the separatist-controlled areas in 2017 decreased luminosity by 20%. The paper argues that the trade disruptions due to the war actions were nested within the negative effect of the separatist rule and accounted for half of the aggregate economic contraction of the separatist-controlled areas.
Keywords: Costs of War, Satellite Data, Trade, Ukraine Crisis, Political Economy
JEL Classification: D74, E01, E20, F51
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