Russia-Ukraine War and the Almaty Restaurant Industry

Nadeem Naqvi (), Eldar Madumarov () and Henrik Egbert ()
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Nadeem Naqvi: KIMEP University, Almaty, Kazakhstan
Eldar Madumarov: KIMEP University, Almaty, Kazakhstan

Bulgarian Economic Papers from Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski

Abstract: This paper examines the impact of a major exogenous shock—the inflow of Russian migrants into Almaty, Kazakhstan, after the Russia-Ukraine conflict began in 2022—on the city's restaurant industry. A large proportion of the migrants moving into Almaty pushed the price for housing significantly upward. Given the dual residential and commercial nature of ground-level real estate, the rapid increase in rental costs spilled into the restaurant industry as one of its most burdensome fixed expenses. By adopting the setup of perfect competition, we can trace how this escalation in fixed costs sets off a sequence of market responses: an initial fall in profit experienced universally by firms, exit of restaurants from the market, a drop in total market supply, increase in meal prices, and changes in the output behavior of restaurants that remain in business. The models show that the number of restaurants declined, meal prices rose, each restaurant served more customers, and industry output fell. Our work also clearly shows, as is consistent with the literature on narratives and economic results, that economic theory does not exist in a vacuum. Our results provide empirical content to a realization that very stylized models—those based on the strongest assumptions, and therefore quite far from complex realities—may supply testable predictions of firm and industry behavior under exogenous shocks. The analysis advanced our understanding of the economic consequences of abrupt migration events but also provided pedagogical value in showing the applicability of theoretical models to real-world scenarios.

Keywords: exogenous shock; real estate rent; restaurant industry; emigration from Russia; Kazakhstan economy (search for similar items in EconPapers)
JEL-codes: D22 D41 L83 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2024-09, Revised 2024-09
New Economics Papers: this item is included in nep-cis and nep-ure
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