War has lowered Ukraine’s economic output not only by destroying factories and removing labor, but also by disrupting how the remaining workers and productive assets are matched with the companies that can best use them, a new study finds.
Basic growth accounting suggests that roughly half of Ukraine’s wartime output loss is attributable to this “misallocation” of capital and labor rather than the physical destruction of productive capacity, according to the study.
When the full-scale invasion occurred, Ukraine lost workers to the military and emigration, but the workers who remained also became harder to match with companies that needed their skills. Millions were displaced within the country, while businesses lost employees or access to electricity and suppliers.
