News

CERGE-EI Scientists' Top Journals Publications at the Start of 2023

12 January, 2023

Vasily Korovkin's article will feature in the American Economic Review and Jakub Steiner's in American Economic Review: Insights.

The American Economic Review published an article by Vasily Korovkin: Korovkin Vasily and Alexey Makarin. 2023. “Conflict and Inter-Group Trade: Evidence from the 2014 Russia-Ukraine Crisis.” American Economic Review, 113(1): 34–70.

Abstract

Does armed conflict reduce trade, even in noncombat areas, through the destruction of intergroup social capital? We analyze Ukrainian trade transactions before and after the 2014 Russia-Ukraine conflict. In a difference-in-differences framework, we find that Ukrainian firms from districts with fewer ethnic Russians experienced a deeper decline in trade with Russia. This decline is economically significant, persistent, and can be explained by erosion of intergroup trust. Affected Ukrainian firms suffered a decrease in performance and diverted trade to other countries. Our results suggest that, through social effects, conflict can be economically damaging even away from combat areas.

American Economic Review: Insights published an article by Jakub Steiner: Robson, Arthur, Larry Samuelson, and Jakub Steiner. Forthcoming. “Decision Theory and Stochastic Growth.” American Economic Review: Insights.

Abstract

This paper examines connections between stochastic growth and decision problems. We use tools from the theory of large deviations to show that wishful thinking decision problems are equivalent to utility maximization problems, both of which are equivalent to growth maximization under idiosyncratic risk. Rational inattention problems are equivalent to growth-optimal portfolio problems, both of which are equivalent to growth maximization under aggregate risk. Stochastic growth generates extreme inequality, with nearly all wealth eventually held by those who happen to have faced empirical distributions that match the solution to the wishful thinking or rational inattention problem.