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War-induced economic convergence in Russian regions

Author

Listed:
  • Yuriy Gorodnichenko

    (University of California, Berkeley)

  • Iikka Korhonen

    (Bank of Finland Institute for Emerging Economies)

  • Elina Ribakova

    (Peterson Institute for International Economics)

Abstract

This paper examines the impact of Russia's 2022 full-scale invasion of Ukraine on Russia's economy at a subnational, or "regional," level. The analysis focuses on the regional disparities and convergence trends within Russia, driven by increased military spending and structural changes. The paper also explores the long-term implications of excessive reliance on military spending for regional development and economic efficiency. The findings suggest that there has been some convergence in regional wages and incomes during the war. However, the sustainability of this trend remains uncertain due to the misallocation of resources and the broader economic challenges facing Russia. The authors also find indirect evidence that regions with a strong military presence have experienced substantial income growth.

Suggested Citation

  • Yuriy Gorodnichenko & Iikka Korhonen & Elina Ribakova, 2025. "War-induced economic convergence in Russian regions," Working Paper Series WP25-21, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp25-21
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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