Does War Destroy Institutions or Reinvent Them? A Spatial Econometric Analysis of Regional Governance in Ukraine and Russia within the Eurasian Political Economy

This study investigates whether armed conflict deteriorates or reinvents institutional quality and function at the subnational level, employing a spatial panel econometric approach to examine Ukraine and Russia within the broader Eurasian political economy from 2010 to 2024. Using the Spatial Durbin Model (SDM) with region and time fixed effects, we analyze how both direct conflict exposure and spatial spillovers from neighboring regions affect institutional quality, measured through government effectiveness, regulatory quality, rule of law, and control of corruption. The results reveal three key findings. First, direct conflict exposure significantly degrades institutional quality, confirming that localized violence erodes governance capacity. Second, conflict generates substantial negative spatial spillovers, whereby instability in one region transmits institutional strain to neighboring areas through population displacement, economic disruption, and psychological contagion. Third, institutional design conditions these effects: Ukraine's decentralized governance attenuates both direct impacts and spatial spillovers, while Russia's centralized architecture amplifies vulnerability. These findings demonstrate that the institutional consequences of war are both direct and spatially diffuse, with decentralization serving as a partial buffer against conflict-induced institutional degradation. The results carry important implications for post-conflict reconstruction strategies across Eurasia, emphasizing the need for regional approaches to governance strengthening and investment in local administrative capacity.