ECONOMETRIC MODELLING OF UKRAINE’S REGIONAL DEVELOPMENT BASED ON PANEL DATA
Abstract
The article estimates regional convergence in Ukraine using a balanced panel of 25 regions over 2012–2020 (225 observations), based on State Statistics Service data on gross regional product deflated to 2012 prices. The relevance of the study stems from the need to establish a pre-war benchmark of regional disparities against which post-war reconstruction policy can be calibrated, since the spatial dimension of recovery will determine whether existing gaps narrow or widen. The purpose of the article is to test for sigma- and beta-convergence of Ukrainian regions and to identify the determinants of regional growth. The methodological framework combines three approaches: analysis of sigma-convergence through the dynamics of the standard deviation of log GRP per capita; cross-sectional estimation of absolute beta-convergence; and panel estimation of conditional beta-convergence using fixed-effects and random-effects models with the Hausman test, complemented by a correction of the Nickell bias through half-panel jackknife and by robustness checks excluding the war-affected Donbas regions and the capital. The results reveal that the dispersion of real GRP per capita increased by 21.4% over the period, yet this divergence is entirely attributable to the collapse of the Donetsk and Luhansk regions after 2014, whose real GRP per capita fell by 53.3% and 71.7% respectively; once these two regions are excluded, the trend in dispersion becomes statistically insignificant. Absolute beta-convergence is absent: poorer regions did not grow faster than richer ones. Conditional beta-convergence is statistically significant under fixed effects, but the estimate is biased by the Nickell effect; after the jackknife correction the convergence speed equals 4.9% per year, which is consistent with international estimates for regional economies. Dynamic GMM estimators proved unreliable given the small number of cross-sectional units. The practical value of the study lies in demonstrating that market mechanisms alone did not equalise regional development in Ukraine, which justifies targeted spatial policy during reconstruction.
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