Does War Destroy Institutions or Reinvent Them? A Spatial Econometric Analysis of Regional Governance in Ukraine and Russia within the Eurasian Political Economy

Ramin Amani and Almas Heshmati ()
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Ramin Amani: Tarbiat Modares University, Tehran, Iran
Almas Heshmati: University of Economics Ho Chi Minh City

No 19060, IZA Discussion Papers from IZA Network @ LISER

Abstract: This study investigates whether armed conflict deteriorates or reinvents institutional quality and function at the subnational level, employing a spatial panel econometric approach to examine Ukraine and Russia from 2010 to 2024. Using the Spatial Durbin Model, we analyze how both direct conflict exposure and spatial spillovers from neighboring regions affect institutional quality, measured through government effectiveness, regulatory quality, rule of law, and control of corruption. The results reveal three key findings. First, direct conflict exposure significantly degrades institutional quality, confirming that localized violence erodes governance capacity. Second, conflict generates substantial negative spatial spillovers, whereby instability in one region transmits institutional strain to neighboring areas. Third, institutional design conditions these effects: Ukraine's decentralized governance attenuates both direct impacts and spatial spillovers, while Russia's centralized architecture amplifies vulnerability. These findings demonstrate that the institutional consequences of war are both direct and spatially diffuse, with decentralization serving as a partial buffer against conflict-induced institutional degradation.

Keywords: spatial econometrics; institutional quality; armed conflict; centralization; decentralization; Ukraine; Russia (search for similar items in EconPapers)
JEL-codes: C23 D74 H77 P48 R11 (search for similar items in EconPapers)
Date: 2026-11
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