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

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  • Vasily Korovkin
  • Alexey Makarin

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.

Suggested Citation

  • Vasily Korovkin & Alexey Makarin, 2023. "Conflict and Intergroup Trade: Evidence from the 2014 Russia-Ukraine Crisis," American Economic Review, American Economic Association, vol. 113(1), pages 34-70, January.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:1:p:34-70
    DOI: 10.1257/aer.20191701
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    Citations

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    Cited by:

    1. Del Prete, Davide & Di Maio, Michele & Rahman, Aminur, 2023. "Firms amid conflict: Performance, production inputs, and market competition," Journal of Development Economics, Elsevier, vol. 164(C).
    2. Katharina Werner & Ahmed Skali, 2023. "Violent Conflict and Parochial Trust: Lab-in-the-Field and Survey Evidence," HiCN Working Papers 404, Households in Conflict Network.
    3. Steinbach, Sandro, 2023. "The Russia–Ukraine war and global trade reallocations," Economics Letters, Elsevier, vol. 226(C).
    4. David B. Audretsch & Paul P. Momtaz & Hanna Motuzenko & Silvio Vismara, 2023. "War and Entrepreneurship: A Synthetic Control Study of the Russia-Ukraine Conflict," CESifo Working Paper Series 10466, CESifo.
    5. David Audretsch & Paul P. Momtaz & Hanna Motuzenko & Silvio Vismara, 2023. "The Economic Costs of the Russia-Ukraine War: A Synthetic Control Study of (Lost) Entrepreneurship," Papers 2303.02773, arXiv.org.
    6. Hu, Zhi-An & Li, Jinghong & Nie, Zhuo, 2023. "Long Live friendship? The long-term impact of Soviet aid on Sino-Russian trade," Journal of Development Economics, Elsevier, vol. 164(C).
    7. Siedler, Thomas & Anger, Silke & Christoph, Bernhard & Galkiewicz, Agata & Margaryan, Shushanik & Peter, Frauke & Sandner, Malte, 2024. "War, International Spillovers, and Adolescents: Evidence from Russia's Invasion of Ukraine in 2022," IZA Discussion Papers 16921, Institute of Labor Economics (IZA).
    8. Zhu, Ge, 2024. "Liberated from care: Long-term care insurance policy and Employment for women," MPRA Paper 120472, University Library of Munich, Germany.
    9. Arvind Ashta & Nadiya Parekh, 2023. "Community Leadership at a Hindu Non-Profit Organization Leads to Outperforming in Indian Microfinance Market," JRFM, MDPI, vol. 16(3), pages 1-20, March.

    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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