Russia-Ukraine War and the Almaty Restaurant Industry

This paper examines the impact of a major exogenous shock—the inflow of Russian migrants into Almaty, Kazakhstan, after the Russia-Ukraine conflict began in 2022—on the city's restaurant industry. A large proportion of the migrants moving into Almaty pushed the price for housing significantly upward. Given the dual residential and commercial nature of ground-level real estate, the rapid increase in rental costs spilled into the restaurant industry as one of its most burdensome fixed expenses. By adopting the setup of perfect competition, we can trace how this escalation in fixed costs sets off a sequence of market responses: an initial fall in profit experienced universally by firms, exit of restaurants from the market, a drop in total market supply, increase in meal prices, and changes in the output behavior of restaurants that remain in business. The models show that the number of restaurants declined, meal prices rose, each restaurant served more customers, and industry output fell. Our work also clearly shows, as is consistent with the literature on narratives and economic results, that economic theory does not exist in a vacuum. Our results provide empirical content to a realization that very stylized models—those based on the strongest assumptions, and therefore quite far from complex realities—may supply testable predictions of firm and industry behavior under exogenous shocks. The analysis advanced our understanding of the economic consequences of abrupt migration events but also provided pedagogical value in showing the applicability of theoretical models to real-world scenarios.