Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240376 
Year of Publication: 
2020
Series/Report no.: 
BOFIT Discussion Papers No. 25/2020
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
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.
Subjects: 
Ukraine
risk-sharing
ethnic heterogeneity
social capital
remittances
spatial regression
JEL: 
E32
E21
R12
P25
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-355-3
Document Type: 
Working Paper

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