Ukraine faces one of the largest urban reconstruction tasks of the century. The war’s destruction compounds long-standing demographic decline, westward population shifts, and an ageing housing stock concentrated in low-demand eastern cities. At the same time, Kyiv and several western regions have emerged as the country’s economic core, attracting people and firms even during wartime. These pre-existing trends shape both the potential benefits of rebuilding and the risks of recreating a spatial pattern no longer supported by fundamentals. The paper examines how reconstruction can raise welfare while keeping costs under control, focusing on where to build and how to build affordably.

Edward Glaeser, Martina Kirchberger, and Andrii Parkhomenko develop a quantitative spatial-equilibrium model of Ukraine that incorporates regional productivity, amenities, housing supply, and individual location preferences. Empirically, the analysis draws on pre-war population and housing data, satellite-based damage assessments, and wartime shifts in population and prices. The authors combine this framework with an examination of Ukraine’s construction sector, procurement institutions, and supply-side bottlenecks to identify strategies that can reduce the unit costs of rebuilding.

The model predicts that wartime destruction, reduction of population by 14 per cent, as well as massive internal displacement since 2022 reduce economic welfare by roughly 6–7 per cent. This estimate abstracts from non-economic costs of the war and the true number is likely several times higher. These aggregate losses mask sharp regional differences: eastern oblasts experience steep population declines and reductions in productivity and amenities, whereas Kyiv, Lviv, and other western regions remain more attractive and less damaged.

To assess post-war policy, the authors compute the marginal welfare gain of directing reconstruction funds to each oblast. Figure 7 summarises this core result: the highest welfare returns arise from investing in Kyiv and western regions, while heavily damaged eastern oblasts generate low returns from a nationwide perspective despite yielding large local benefits. Productive capacity and amenity levels explain most of the variation in these returns, as do wartime migration patterns that reinforce the pre-existing westward shift.

These patterns reflect underlying productivity and amenity differences inferred from pre-war wages, prices, and population trends. Kyiv’s pull arises from strong fundamentals and possible agglomeration effects. By contrast, many eastern cities had long been shrinking, with durable housing sustaining populations despite weakening economic demand. Once part of this housing stock is destroyed, the model finds little economic force drawing residents back unless reconstruction is heavily subsidised or driven by strategic priorities.

The authors emphasise the resulting equity–efficiency trade-off: prioritising productive, growing regions yields the largest national gains, but rebuilding heavily damaged areas may be justified on cohesion, symbolic, or security grounds that lie outside the model.

The analysis also has caveats. The model is static and cannot determine the optimal sequencing of reconstruction or capture learning-by-doing. Security risks, donor preferences, and fiscal capacity are not modelled explicitly. Moreover, damage measures used in the analysis cannot distinguish between residential and non-residential infrastructure.

Beyond spatial allocation, the paper highlights three broad strategies to lower reconstruction costs: openness to foreign contractors and materials; standardisation of building codes and land-use rules to facilitate scale economies; and “investing in investing”—early procurement reform, skills development, and infrastructure preparation that make reconstruction itself faster and cheaper. Evidence from Ukraine’s e-procurement system, Prozorro, indicates regional variation in bidding intensity and cost savings, with western oblasts exhibiting more competitive procurement outcomes. This heterogeneity suggests that regions differ not only in expected welfare returns (as shown in Figure 7) but may also differ in the cost of delivering reconstruction.

Overall, the analysis implies that Ukraine’s reconstruction will achieve larger welfare gains if it adapts to the country’s new economic geography rather than replicates pre-war settlement patterns. Prioritising productive, high-amenity regions improves national outcomes, while attention to equity, security, and the political imperative of rebuilding devastated areas remains unavoidable. Effective procurement, institutional reform, and investment in construction capacity can help ensure that reconstruction is both efficient and socially durable.

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Rebuilding Ukraine’s Cities: Maximizing Benefits and Minimizing Costs

Authors:

Edward L. Glaeser (Harvard University and NBER)

Martina Kirchberger (Trinity College Dublin and CEPR)

Andrii Parkhomenko (University of Southern California and Kyiv School of Economics)

(paper presented at the 1^st Economic Policy: Papers on European and Global Issues Conference)