Regional risk-sharing in Ukraine

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Title: Regional risk-sharing in Ukraine
ISBN: 978-952-323-355-3
Author: Fidrmuc, Jarko ; Moroz, Serhiy ; Reck, Fabian
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2020
Series number: 25/2020
Year of publication: 2020
Publication date: 23.11.2020
Pages: 34
Subject (yso): etnisyys; vähemmistöt; geopolitiikka; konfliktit; kulutus; tulot; kotitaloudet (organisaatiot); sosiaalinen pääoma
Keywords: Bofit-kokoelma; Ukraina
JEL: E32; E21; R12; P25
Other keywords: Ukraine; risk-sharing; ethnic heterogeneity; social capital; remittances; spatial regression
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 percent 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.
Rights: https://helda.helsinki.fi/bof/copyright


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