Researchers analyze the economic origins/disturbances of the war in Ukraine


Number of employees in foreign-controlled establishments, by location of the headquarters of their parent companies. Credit: Complexity Science Hub Vienna/Harvard’s Growth Lab

Researchers from Harvard’s Growth Lab and the Complexity Science Hub Vienna have published a new analysis detailing how the Ukrainian economy has gradually moved away from Russia and towards the West, what impact this relocation of companies has had on regional specialization and education skills, and what consequences businesses outside Ukraine, especially in Russia and the EU, are now facing as a result of the war.

The published analysis, The economic geography of the war in Ukraine, provides 12 facts and visualizations about the relationship between the economies of Ukraine, Russia and the EU. The analysis includes:

The tectonic shift in trading begins in 2013

In 2012, Ukraine sent around 25% of its exports to Russia and the European Union. In 2014, exports to Russia collapsed to about a third of their 2012 levels. Today, only 7% of Ukrainian exports go to Russia. By contrast, the EU now imports more than 40% of all Ukrainian exports. In its shift to the West, Ukraine has increased its presence in supply chains serving European manufacturing hubs and benefited from growing foreign investment. Germany, for example, is a major investor in Ukraine.

Impact on foreign investment

Western companies with investments in Ukraine and Russia will not suffer huge losses, but the exposure is unevenly distributed between countries. Investments linked to the supply chain are even more concentrated in a few countries and regions: the impact of the war will be felt mainly in Europe (with the greatest losses affecting southern Germany, Paris, southern Finland and northern Italy) and some other neighbors of Russia in Asia, such as Japan. Additionally, on a per capita basis, several small countries in Eastern and Central Europe are disproportionately affected, such as Austria, Switzerland, Estonia, Lithuania and Slovakia.

The analysis was led by Frank Neffke, team leader and principal investigator at the Complexity Science Hub in Vienna, in collaboration with Matté Hartog and Yang Li, researchers at the Harvard Kennedy School’s Growth Lab. Their analysis is driven by Metroverse, the Growth Lab’s data visualization tool that illustrates the technology capabilities of more than 1,000 cities around the world and their opportunities for future growth and diversification. The dataset includes spatial, ownership and industry information for over 200 million economic establishments.

“The dataset allows us to study the economic makeup of cities not just within one country, but across different nations,” Neffke added. “As we know what each city does, and also where investments flow between cities globally, we can see the effects of the war in Ukraine on Western economies.”

War could see Ukraine’s population drop by a third

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Researchers analyze the economic origins/disruptions of the Ukraine War (2022, March 28)
retrieved March 28, 2022

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