The economic costs of conflict: A case study of the Russo-Ukrainian War

Since 2014, an armed conflict between pro-Russian separatists and the Ukrainian army in Donbas has been causing damage to the society, infrastructure, and eco- nomics of Ukraine. This thesis deals with the conflict in eastern Ukraine and focuses on its economic impact in the period from 2014 to 2020. Using the syn- thetic control method and the augmented synthetic control method, on a country level we evaluate the economic cost of the conflict in terms of the GDP per capita of Ukraine and Russia. On the regional level, we estimate the impact of the con- flict on the GRP per capita of the Luhansk and Donetsk regions. Moreover, we look for evidence of spillover effect on neighbouring Dnipropetrovsk region and Kharkiv region in Ukraine and Krasnodar Krai, Belgorod Oblast, and Rostov Oblast in the Russian Federation. While the results indicate a significant gap in GDP per capita of Ukraine attributable to the war, the negative economic effect on the GDP per capita of the Russian Federation after accounting for the price drop of crude oil in 2014 and 2015 is only minor and too insignificant to interpret it with confidence. The findings further suggest a destroying effect of the conflict on GRP per capita of both Luhansk and Donetsk regions. The spillover effect of the war on neighbouring regional..