ANATOMY OF THE "DAYTON TRAP": INSTITUTIONAL, ECONOMIC, AND DEMOGRAPHIC LESSONS OF BOSNIA FOR POSTWAR UKRAINE

Abstract

The current literature on the economics of post-conflict reconstruction focuses primarily on infrastructure reconstruction and macroeconomic stabilization, while long-term institutional risks are often overlooked. The aim of this article is to explore the mechanisms of the emergence of the “Dayton Trap” in Bosnia and Herzegovina (BiH)—a state in which a peace agreement preserves economic stagnation—and to assess the risks of this scenario recurring during Ukraine’s post-conflict reconstruction. Using comparative institutional analysis and macroeconomic and demographic data (1995–2023), the study traces the causal relationship among institutional design, the lack of export incentives, and mass migration.

The results show that BiH’s hyper-fragmented governance system has critically increased transaction costs, blocking the inflow of foreign direct investment (FDI) into the tradable goods sector. The shortage of highly productive jobs has led to the replacement of exports with remittances from emigrants, which has triggered symptoms of the local “Dutch disease” and precipitated a depopulation catastrophe. The projection of these conclusions to Ukraine shows that large-scale international assistance without a parallel policy of export-oriented reindustrialization carries the risk of transforming temporary refugee status into permanent economic emigration. To avoid demographic collapse, the need to abandon the donor-dependent model in favor of asymmetric decentralization, introduce comprehensive military risk insurance for FDI, and create jobs through integration into the EU’s global value chains is justified.