New CEPR Policy Insight - The effect of the war on human capital in Ukraine and the path for rebuilding

Monday, June 20, 2022

A new CEPR Policy Insight estimates the effect of the war on Ukraine’s human capital and identifies key directions for rebuilding human capital in the country. This includes the quantity and quality of schooling for children, quality of higher education, training and retraining programmes for adults, assistance for people with physical and mental disabilities, post-deployment re-integration into the civilian sector, population growth and fertility, and the promotion of self-motivating mechanisms.

Yuriy Gorodnichenko (University of California at Berkeley and CEPR), Marianna Kudlyak (Federal Reserve Bank of San Francisco and CEPR) and Ayşegül Şahin (University of Texas at Austin)

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The Policy Insight, by Yuriy Gorodnichenko, Marianna Kudlyak, and Ayşegül Şahin develops a framework to identify the key channels of the human capital consequences of the war. The research highlights how the war has direct and immediate effects on the size of the workforce because of the increase in deaths, military mobilisation, and increased migration out of the country. The total count of displaced individuals to be around 28.6 million individuals, not counting those killed and injured, a figure which constitutes more than 2/3 of the entire population. In addition to these immediate adverse effects, there are various other channels that could have long-lasting consequences, including the disrupted education of younger cohorts, which will likely affect future earnings and lower aggregate output growth. At the same time, the decline in fertility and human capital depreciation – due to loss of potential work experience and deterioration of health – all contribute negatively and persistently to the human capital stock of the country.

Even as the war continues, it is imperative to implement, post haste, a strategy to combat the substantial effects of the war on Ukrainian human capital. The authors highlight several policy suggestions with the aim of mitigating potential losses and rebuilding capabilities:

  • Educational opportunities should be provided for displaced children, including classes for Ukrainian refugees in neighbouring countries, as well as expanding schools in those parts of Ukraine to which many internally displaced families have moved, and providing remote and virtual tutoring where possible.
  • Establishing training and retraining centres for adults will be essential to the post-war economy. Programmes should focus on construction, civil engineering, health, information technology, as well as the pre-war agricultural export industries.
  • Disability-inclusive infrastructure and workplace policies can empower and make it easier for people with disabilities to be part of societal rebuilding and development.
  • A separate focus should be devoted to re-integration of individuals serving in the Armed Forces of Ukraine into civilian life.
  • Other policies should focus on fertility in order to help boost human capital by increasing the size of new birth cohorts, these could include lump-sum payments for having children. 
  • Finally, policies are needed to motivate investment in human capital, fiscal and non-fiscal. Tapping into a strong national identity will be key to reconstructing markets and infrastructure, strengthening social cohesion and trust in institutions. Self-incentives could be amplified by easier access to retraining, better labour markets and regulation, improved working conditions and other mechanisms that enhance quality of life.

The policy suggestions provided contribute to the formulation of a strategic plan for the development of the post-war economy in Ukraine and develop directions for rebuilding human capital in the country

Disclaimer: Any opinions expressed are those of the authors and do not reflect those of the Federal Reserve Bank of San Francisco, the Federal Reserve System or any other organisation with which authors are affiliated.

To reach the authors for comment, or for more information, please contact CEPR Press & Communications Officer Alexander Southworth: [email protected].

Find a full list of CEPR's Policy Insights here >>>.