(Akresh _et al._ 2023) and Colombia’s mid-20<sup>th</sup> century ‘La Violencia’ that slowed structural transformation via occupational choices by individuals who experienced violence in school or pre-school age (Fergusson _et al._ 2020).<sup>2</sup> Conflict can affect those not directly exposed if households adjust their behavior (Tapsoba 2023) or asset portfolios (Rockmore 2020; Sinha _et al._ 2022) in anticipation.

Our survey shows that, in Ukraine, the war triggered a marked drop in expectations for the future, but social safety nets and non-agricultural income sources held up. Ukraine’s comparative advantage in agriculture contributed to continued strong fundamentals in the sector; in fact, instead of divesting assets, most farmers expressed interest in expanding their holdings by leasing or purchasing land through markets.<sup>3</sup> Farmers’ perceived priorities focus on better access to output markets and protection against rapidly worsening terms of trade.

Regarding the second question, estimates on the extent to which direct war-related actions have affected area cultivated vary widely partly because 2021 yielded a record harvest so that any direct comparisons that fail to adjust for weather or for potential substitution would tend to overestimate war effects.<sup>4</sup> Moreover, conflict can affect economic activity indirectly, e.g., by reducing trust (Korovkin & Makarin 2023), increasing mobility and trade cost to force input substitution (Amodio & Di Maio 2018), reducing interaction (Couttenier _et al._ 2022), or <mark>lowering project returns</mark> (de Roux & Martinez 2021). Impacts may thus be felt well beyond the areas directly affected by war and conflict (Federle _et al._ 2022).

The farm survey data analyzed here shows that any direct war effect on area cultivated was eclipsed by large increases in prices for imported inputs that affect all farmers together with changes in labor cost that vary across regions in line with labor availability. Together with marked drops in output prices and reduced market participation, high input prices reduced farmers’ profitability and liquidity, an outcome most pronounced but not limited to areas affected directly by conflict.

Finally, a distinguishing feature of Ukraine’s agriculture sector is that many producers remain informal (Nivievskyi _et al._ 2021). While there has been considerable progress on characterizing and quantifying informality ( Ohnsorge & Yu 2021) and its correlates in terms of financial development (Capasso _et al._ 2022) and other development outcomes (Ulyssea 2020), the debate on the direction of causality remains largely open. If informal firms are less productive than formal ones (Nguimkeu 2022), they will be unable to compete (La Porta & Shleifer 2014) or afford fixed formalization fees. If this is the case, informal firms

> 2 Short-term health outcomes may also be affected (Akresh _et al._ 2011), especially close to the location of violent events (Akresh _et al._ 2022). 3 Due to egalitarian distribution of land when large holdings were privatized and a moratorium on land sales that was only lifted recently, most Ukrainian households own and rent out land. To the extent that rental contracts can adjust, better agriculture sector performance could thus provide broad-based benefit via higher land values.

> 4 USDA’s April 2023 USDA/WASDE report projects wheat production in Ukraine at 21.0 million tons, a drop of 12.1 million tons compared to previous years (see <u>https://www.usda.gov/oce/commodity/wasde/wasde0423.pdf), much higher than what is estimated by the EU (Ben Aoun</u> _et al._ 2022). As Deininger _et al._ (2023) show, some of the difference between estimates may be due to different geographical domains. A clarification of methodological assumptions will be desirable.

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