Abstract
This paper analyzes the effects of a major exogenous shock, namely the influx of Russian migrants into Almaty, Kazakhstan following the 2022 Russia–Ukraine conflict, on the city’s restaurant industry. The sharp rise in housing demand significantly increased rents, which spilled over into commercial spaces and raised fixed costs for restaurants. Using a perfect competition framework, we examine how higher fixed costs affected market outcomes. The analysis predicts an initial decline in profits, followed by firm exit, reduced market supply, and higher meal prices. Empirical results are consistent with these predictions. The number of restaurants declined, prices increased, surviving restaurants served more customers, and total industry output fell. Beyond documenting these effects, the paper highlights the usefulness of highly stylized economic models in generating testable predictions under real world shocks. The findings contribute to understanding the economic consequences of sudden migration events and demonstrate the pedagogical value of applying theoretical models to complex real world settings.
Keywords: Exogenous shock; Real estate rent; Restaurant industry; Kazakhstan; Russia–Ukraine conflict; Microeconomics teaching
JEL: D22; D40; F20; L83.
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