The Loss of Crimea How Much Does Ukraine Lose, and How Much Does Russia Gain, a Computable General Equilibrium Model
Michael P. Barry

The Crimean Penninsula has recently been transferred from Ukraine to the Russian Federation, and many signs point to more territories in Eastern Ukraine being similarly transferred to Russian control. Outide of the political ramifications of these events, what are the economic effects of such a transfer of resrources and productive capacity. In particular, Crimea and Eastern Ukraine are extremely rich in natural gas and oil reserves. How much does Ukraine lose and how much does Russia gain when control of these resources change? This paper attempts to address these and other issues through the use of a computable general equilibrium model (CGE). The model is a large, multi-regional, multi-sectoral, multi-factor system of simultaneous equations. The “shock” to the CGE model is the transfer of all endowment factors of production in the Crimea and the parts of Eastern Ukraine which might move into Russian hands. The model solves for a new equilibrium, and allows for analysis of effects. As expected. results suggest that Ukraine’s economy suffers a major loss, and Russia experiences a major gain.

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