Casualties of border changes: evidence from nighttime lights and plant exit

Abstract

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. Using nighttime lights data and geo-referenced plant-level data, we find that regions with deteriorating market access saw 43% less growth in lights – translating into 6–12% lower growth in GDP depending on the assumed lights-GDP elasticity – and a 35% increase in the exit probability for manufacturing plants after 2014. Exploiting variations in closed local border crossings in the northern regions, we find that these effects may be partly driven by less cross-border labour flows.