North Korean Economy Watch

Peterson Institute Working Paper (Sept 2009)
Stephan Haggard and Marcus Noland

(Download PDF here)

Abstract: The state is often conceptualized as playing an enabling role in a country’s economic development—providing public goods, such as the legal protection of property rights, while the political economy of reform is conceived in terms of bargaining over policy among elites or special interest groups. We document a case that turns this perspective on its head: efficiency-enhancing institutional and behavioral changes arising not out of a conscious, top-down program of reform, but rather as unintended (and in some respects, unwanted) by-products of state failure. Responses from a survey of North Korean refugees demonstrate that the North Korean economy marketized in response to state failure with the onset of famine in the 1990s, and subsequent reforms and retrenchments appear to have had remarkably little impact on some significant share of the population. There is strong evidence of powerful social changes, including increasing inequality, corruption, and changed attitudes about the most effective pathways to higher social status and income. These assessments appear to be remarkably uniform across demographic groups. While the survey sample marginally overweights demographic groups with less favorable assessments of the regime, even counterfactually recalibrating the sample to match the underlying resident population suggests widespread dissatisfaction with the North Korean regime.

JEL Codes: P2, P3, F22
Keywords: failed states, transition, reform, North Korea, refugees

This entry was posted on Wednesday, September 30th, 2009 at 7:58 pm and is filed under 2002 Economic reforms, General markets (FMR: Farmers Market), Peterson Institute, Political economy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.