The impact of the war on human capital and productivity in Ukraine

ABSTRACT

This article explores the long-term macroeconomic impact of the war in Ukraine. Exploiting a new stock measure of human capital combining the quality and quantity of education and adult skills, this article quantifies the long-term effect of the war on aggregate productivity through the human capital channel. Results suggest that losses in long-run aggregate productivity could be at about 7% if the war lasts two years. These adverse effects come from school closure and the resulting decline in student learning outcomes and losses in workers’ skills, which, without remedial policy action, could persist for decades.

KEYWORDS:

• Human capital
• productivity
• educational achievement
• student test score
• adult test score
• Ukraine

JEL:

• E24
• I19
• I20
• I25
• I26
• I28

Acknowledgements

The authors would like to thank David Turner, Alessandro Maravalle, Kateryna Obvintseva, Miyako Ikeda, Francesco Avvisati, Marco Paccagnella, Lucie Cerna and Abel Schumann for useful comments and suggestions. The usual disclaimer applies. The views and opinions expressed in this article do not reflect the views of the OECD.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 It would be fair to note that long-term unemployment concerns mostly low-skill workers whereas the war affects a more heterogenous groups of workers and that there might be skill gains in certain areas such as managerial capacity or foreign language, though these latter gains would concentrate on sub-group of soldiers only. We can reasonably assume that on average, skills of an average soldier will be eroded over the course of the war.

2 Indirect evidence is provided in Dinerstein, Megalokonomou, and Yannelis (2020), who found in a natural experiment that unemployment spells of Greek teachers had a negative effect on the student test scores of the classes they teach.

3 The loss of 20 points for 42 months correspond to a loss of 3.6% over two years: ((20/314)/42)*24 where 314 denotes the average adult test score.

4 Ogbeifun and Shobande (2021) show that mean years of schooling is an important driver of economic growth. Shobande and Asongu (2021) provide evidence about the importance of education spending on growth. At the same time, Égert, de la Maisonneuve, and Turner (2022) find that the quality of education, measured through student test scores is more important than the quantity of education, and that a measure of human capital based on a mixture of the quality and quantity of education is a strong driver of total factor productivity, and hence per capita income.

5 Our calculations assumes that learning losses have no direct linear relationship to the length of the war. This stands in contrast with Angrist et al. (2022) who assume that learning losses are a linear function of school closure. They estimate that a war lasting more than a year would be associated with a 30-point loss in student test scores in Ukraine, which is broadly in line with the 0.8 standard deviation in student test scores used in our simulations, assuming a 2-year war.

Additional information

Notes on contributors

Balázs Égert

Balázs Égert is a Senior Economist at the OECD. He previously worked at the Austrian Central Bank (2003-2007). He was Visiting Researcher at the South African Reserve Bank (2007), Bruegel (2006), CESifo (2006), the Czech National Bank (2006), the central bank of Hungary (2005), the Bank of Finland/BOFIT (2004/2005) and the Bank of Estonia (2002). He earned his PhD at the University of Paris X-Nanterre (2002).

Christine de la Maisonneuve

Christine de La Maisonneuve is an Economist in the OECD Economics Department currently working on the quantitative assessment of structural reforms in the Macroeconomic Analysis Division. She has worked extensively on human capital, health and long-term care, ageing issues and long-term growth scenarios. She also contributed to many economic surveys of OECD members and emerging economies.