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Assessing Ukraine's Role in European Value Chains: A Gravity Equation-cum-Economic Complexity Analysis Approach

Author

Listed:
  • Matte Hartog

    (Center for International Development at Harvard University)

  • Frank Neffke

    (Center for International Development at Harvard University)

  • J. Ernesto Lopez-Cordova

Abstract

We analyze Ukraine's opportunities to participate in European value chains, using traditional gravity models, combined with tools from Economic Complexity Analysis to study international trade (exports) and Foreign Direct Investment (FDI). This toolbox is shown to be predictive of the growth and entry of new exports to the EU's Single Market, as well as foreign direct investments from the Single Market in Ukraine. We find that Ukraine has suffered from a decline of trade with Russia, which has led not only to a quantitative but also a qualitative deterioration in Ukrainian exports. Connecting to western European value chains is in principle possible, with several opportunities in the automotive, information technology and other sectors. However, such a shift may lead to a spatial restructuring of the Ukrainian economy and a mismatch between the geographical supply of and demand for labor.

Suggested Citation

  • Matte Hartog & Frank Neffke & J. Ernesto Lopez-Cordova, 2020. "Assessing Ukraine's Role in European Value Chains: A Gravity Equation-cum-Economic Complexity Analysis Approach," CID Working Papers 129a, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:129a
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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2020-10-cid-fellows-wp-129-ukraine-role.pdf
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    References listed on IDEAS

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    Keywords

    economic complexity; value chains; foreign direct investment;
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