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Conflict and Intergroup Trade: Evidence from the 2014 Russia-Ukraine Crisis

  • Vasily Korovkin
  • Alexey Makarin
American Economic Review
vol. 113, no. 1, January 2023
(pp. 34-70)
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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.

Citation

Korovkin, Vasily, and Alexey Makarin. 2023. "Conflict and Intergroup Trade: Evidence from the 2014 Russia-Ukraine Crisis." American Economic Review, 113 (1): 34-70. DOI: 10.1257/aer.20191701

Additional Materials

JEL Classification

  • D74 Conflict; Conflict Resolution; Alliances; Revolutions
  • F14 Empirical Studies of Trade
  • F51 International Conflicts; Negotiations; Sanctions
  • J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
  • P31 Socialist Enterprises and Their Transitions
  • P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
  • Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification