# **3.3 Exploring the geographical incidence of conflict effects**

An advantage of using remotely sensed rather than statistical data is that by using estimated coefficients to obtain predicted values of v for scenarios where either _CIt_ or _λt_ are set to zero for _t_ = 2022 or 2023, the above regressions allow us to obtain estimates of area cultivated in each VC under different counterfactuals. YY Aggregating these VC-level estimates at the national level (or for any subgroup of VCs) and subtracting from the values obtained in the full model can provide estimates of direct or indirect conflict effects for different geographical domains, including areas that are currently not under Ukrainian control.<sup>11</sup> Table 5 presents the relevant estimates for total area with winter crops in 2022 and 2023 in the 10,002 VCs that cultivated such crops at any point during 2019–23 (panels A and B) and with summer crops in the same period for 10,556 VCs (panels C and D). The estimates in table 5 are for the counterfactual scenarios of no direct conflict (all elements of **_CI_** _vt_ or **_CI_** _vt-1_ are set to zero), in line 2; no macro or conflict effects ( _λ22/3_ = 0 in addition), in line 3; and other scenarios for the entire country (column 1), for the 8,147 and 9,425 (in different time periods) VCs that were not affected or the 1,855 to 1,284 VCs that were affected by the conflict (columns 2 and 3) and, for the latter, VCs that were controlled by Ukraine (column 4) or Russia (column 5).

The estimates suggest that the conflict reduced the area cultivated with winter crops by 10% (0.84/8.47) and 24% (1.79/7.45) in 2022 and 2023, respectively, and it reduced the area cultivated with summer crops in the same years by 12% (2.16/17.89) and 10.5% (2.08/19.7), respectively. Although indirect or macro effects accounted for close to 90% (0.75/0.84) of the total for winter crops in 2022, their importance declined to about 61% for 2022 summer (1.33/2.16) and 2023 winter (1.09/1.79) crops, and to less than 25% (0.51/2.08) for 2023 summer crops. This may reflect adaptation to the conflict outside the areas directly affected. Finally, half to slightly less than three-quarters of the direct conflict effects on agricultural area (50% and 71% for winter and summer crops, respectively, in 2022, and 72% and 58% for winter and summer crops, respectively, in 2023) were on territory controlled by Russian forces. This contrasts to an increase of overall economic activity as measured by nighttime lights (Zhukov 2023), highlighting the importance of measuring outcomes in a way that is suited to the question at hand.

# **4. Assessing the effects of the conflict on farm profitability**

Beyond changes in area cultivated, the conflict may have affected the profitability of agricultural production. Data on output and input prices point to large price effects, especially in the first year of the war. We combine these with information on input use and profitability from a panel of 1,206 small and

> 11 In terms of the model results reported in table 3, column (6), scenario one involves setting the “any conflict” dummy and “damaged field area” to zero, whereas scenario two involves in addition setting the 2022 dummy to zero.

12