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Regional risk-sharing in Ukraine

Author

Listed:
  • Jarko Fidrmuc

    (Zeppelin University Friedrichshafen
    Mendel University Brno
    Austrian Institute of Economic Research (WIFO)
    Vilnius Universit)

  • Serhiy Moroz

    (Slovak University of Agriculture in Nitra)

  • Fabian Reck

    (Zeppelin University Friedrichshafen)

Abstract

This paper analyzes the impact of ethnic heterogeneity and military conflict on the degree of regional consumption risk-sharing in Ukraine. Ethnicity and violent conflicts can influence risk-sharing e.g. through social capital, ethnic fractionalization, migration, and remittances. The sample consists of 25 Ukrainian oblasts and covers the highly volatile period from 2003 to 2016. Our results suggest that the degree of consumption risk-sharing is comparably high, between 70 and 80% on average. Moreover, consumption risk-sharing is significantly higher in the regions with a large Russian minority, which are enjoying special treatment by Russia. By contrast, the degree of financial development, as proxied by deposit and loan share in GRP, does not significantly affect the regional degree of consumption risk-sharing. Furthermore, we apply spatial models to control for spatial dependence across regions. Results are confirmed and it is shown that spatial correlation is important. Finally, we show that the recent geopolitical conflict in east Ukraine changed the regional degree of consumption risk-sharing.

Suggested Citation

  • Jarko Fidrmuc & Serhiy Moroz & Fabian Reck, 2021. "Regional risk-sharing in Ukraine," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 645-660, August.
    • Handle: RePEc:kap:empiri:v:48:y:2021:i:3:d:10.1007_s10663-020-09500-7
    DOI: 10.1007/s10663-020-09500-7
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    More about this item

    Keywords

    Ukraine; Risk-sharing; Ethnic heterogeneity; Social capital; Remittances; Spatial regression;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics

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