Casualties of border changes: Evidence from nighttime lights and plant exit.

Abstract

We investigate the economic effects of the Russia-Ukraine conflict—following the 2014 annexation of Crimea—on Russian border regions. While southern regions gained market access to Crimea, northern regions lost market access to Ukraine because of tighter border controls and the closing of many border crossings. Using nighttime lights satellite data and geo-referenced manufacturing plant-level data, we show that regions with deteriorating market access saw less growth in lights—translating into about 3.4%4% lower growth in GDP—and more plant exit—about 1.5 percentage points—after 2014. Exploiting variations in closed local border crossings in the northern regions, we f ind these effects to be localized and likely driven by less cross-border labor flows.