THE TRANSFORMATION OF THE RELATIONSHIP BETWEEN ECONOMIC WELFARE AND CRIME UNDER THE IMPACT OF WAR: A LEGAL AND ECONOMETRIC ANALYSIS OF PANEL DATA FROM UKRAINIAN REGIONS BEFORE AND DURING THE FULL-SCALE INVASION

Abstract

The full-scale Russian invasion of Ukraine has fundamentally altered the region's socioeconomic conditions, demographic structures and crime patterns, creating new challenges in authors’ understanding of the relationship between economic welfare and crime. While traditional economic theory assumes that improved economic conditions reduce criminal activity by increasing the opportunity cost of offending, wartime conditions can substantially modify these relationships through forced displacement, regional heterogeneity, and institutional disruption. This study examines how the relationship between economic welfare and crime rates in Ukrainian regions changed during the full-scale war, and whether this relationship varies according to regional exposure to military conflict. The study uses a balanced panel dataset covering 25 Ukrainian regions (24 oblasts and the city of Kyiv) from 2018 to 2025. Economic welfare is operationalised using average monthly wages, while crime rates are measured as the number of registered criminal offences per 100,000 people in a given region. The analysis incorporates the proportion of internally displaced persons (IDPs) and distance from the active front line as indicators of the demographic and spatial effects of war. The empirical strategy is based on two-way fixed-effects panel regression models with Driscoll–Kraay standard errors. These were selected following diagnostic testing for cross-sectional dependence, autocorrelation, multicollinearity and model specification. Robustness analyses include alternative functional forms, subsample estimation, sensitivity tests and Granger causality analysis. The results show that the relationship between economic welfare and crime changed significantly following the full-scale invasion. There is no statistically significant direct association between average wages and regional crime rates. However, the interaction between wages and the wartime period is significant, suggesting that war has altered the underlying relationship. The strongest finding is the positive correlation between the proportion of internally displaced people and crime rates, which remains consistent across different models and robustness checks. Furthermore, the impact of economic welfare varies according to regional exposure to war, confirming pronounced spatial heterogeneity. Further analyses indicate that the observed relationships are nonlinear and that registered crime does not provide statistically significant predictive information for macroeconomic forecasting. The present study makes a significant contribution to the extant literature by providing one of the first panel-data assessments of the interaction between economic welfare, forced displacement, wartime spatial heterogeneity, and regional crime in Ukraine. From a methodological perspective, the study highlights the importance of diagnostic-based model selection, demographic controls and spatial measures of war exposure. The findings support the development of evidence-based regional public safety policies and post-war recovery plans.