Conflict and Intergroup Trade: Evidence from the 2014 Russia-Ukraine Crisis
Vasily Korovkin, Alexey Makarin
American Economic Review · 2023 · Volume 113 · Issue 1
Abstract
Does armed conflict reduce trade, even in noncombat areas, through the destruction of intergroup social capital? We analyze Ukrainian trade transactions before and after the 2014 Russia-Ukraine conflict. In a difference-in-differences framework, we find that Ukrainian firms from districts with fewer ethnic Russians experienced a deeper decline in trade with Russia. This decline is economically significant, persistent, and can be explained by erosion of intergroup trust. Affected Ukrainian firms suffered a decrease in performance and diverted trade to other countries. Our results suggest that, through social effects, conflict can be economically damaging even away from combat areas.
Keywords
Conflict, Conflict Resolution, Alliances, Revolutions, Empirical Studies of Trade, International Conflicts, Negotiations, Sanctions, Economics of Minorities, Races, Indigenous Peoples, and Immigrants, Non-labor Discrimination, Socialist Enterprises and Their Transitions, Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid, Economic Sociology, Economic Anthropology, Language, Social and Economic Stratification
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