Unveiling the North Korean Economy: Collapse and Transition

341 Pages·2017·1.96 MB·English

by  Byung-Yeon Kim

Unveiling the North Korean Economy
Collapse and Transition
North Korea is one of the most closed and secretive societies in the
world.Despiteahighlevelofinterestfromtheoutsideworld,wehave
very little detailed information about how the country functions
economically. In this valuable book for both academic and policy-
makingcircles,Byung-YeonKimoffersthemostcomprehensiveand
systematicanalysisofthepresent-dayNorthKoreaneconomyinthe
context of economic systems and transition economics. The book
addresses what is really happening in the North Korean economy,
why it has previously failed and how the country can make the
transition to a market economy. It takes advantage of not only
carefully reconstructed macroeconomic data but also rich, new data
at the micro level, such as quantitative surveys of North Korean
refugees settled in South Korea and surveys of Chinese companies
thatinteractheavilywithNorthKorea.
byung-yeon kim isaprofessorintheDepartmentofEconomicsat
Seoul National University. He has been recognised with the T. S.
Ashton Prize from the Economic History Society of the United
Kingdom and the Chungram Award from the Korean Economic
Association and as Distinguished Researcher in Humanities and
SocialSciencesbytheNationalResearchFoundationoftheRepublic
ofKorea.HeisaregularcolumnistonNorthKoreanissuesinaSouth
Koreannewspaper,theJoongAngDaily.
Unveiling the North
Korean Economy
Collapse and Transition
byung-yeon kim
SeoulNationalUniversity
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www.cambridge.org
Informationonthistitle:www.cambridge.org/9781107183797
DOI:10.1017/9781316874882
©Byung-YeonKim2017
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2017
3rdprinting 2 017
PrintedintheUnitedKingdombyClays,StIvesplc
AcataloguerecordforthispublicationisavailablefromtheBritishLibrary.
ISBN978-1-107-18379-7Hardback
ISBN978-1-316-63516-2Paperback
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Contents
ListofFigures pagevii
ListofTables viii
Acknowledgements xi
Introduction 1
1 AnEvaluationoftheSocialistEconomy 6
1.1 EconomicSystems 6
1.2 ThePerformanceoftheSocialistEconomy 11
1.3 HouseholdsinSocialistEconomies 21
1.4 FirmsinSocialistEconomies 25
1.5 SustainabilityandCollapseoftheSocialist
Economy 29
2 TheNorthKoreanEconomy 41
2.1 TheNorthKoreanSocialistEconomicSystem 41
2.2 PerformanceoftheNorthKoreanSocialist
EconomicSystem 70
2.3 Households:SurvivinginInformalMarkets 91
2.4 Firms:SurvivingwithMarketsandForeignTrade 123
2.5 RegimeStabilityinNorthKorea:Corruption
andMarkets 173
3 TransitionoftheNorthKoreanEconomy 217
3.1 AnOverviewoftheTransitionExperience 217
3.2 MacroeconomicStabilisationandLiberalisation 251
v
vi contents
3.3 PrivatisationandNewEntryofFirms 270
3.4 EconomicIntegrationwithSouthKorea 278
Conclusion 301
References 305
Index 323
Figures
1.1 TheCapitalistEconomicSystem page8
1.2 TheSocialistEconomicSystem 9
2.1 GDPPerCapitaIndicesofSouthKoreaandNorth
Korea,1953–1980 81
2.2 TrendsoftheNorthKoreanGDP:Estimatesfrom
thisStudyandtheBankofKorea(1989=100) 83
A.2.1 Export,ImportandTotalTradeofNorthKorea,
1990–2014 164
A.2.2 TheAmountofMainExportItemsofNorthKorea
andtheirSharesinTotalExport 166
A.2.3 TheAmountofMainImportItemsofNorthKorea
andtheirSharesinTotalImport 169
A.2.4 TheSharesofNorthKoreanExportbyMajor
TradingPartners 171
A.2.5 TheSharesofNorthKoreanImportbyMajor
TradingPartners 172
2.3 DifferencesinSupportforaMarketEconomy
DependingonMarketActivities 196
3.1 TheChannelsofFoodSupplyinNorthKorea 253
3.2 OfficialandInformalMarketExchangeRates
inNorthKorea,1996–2015 261
3.3 ThePatternsofExchangeRateRegimeMovements
ofSomeSelectedTransitionCountries 262
3.4 StagesofEconomicTransitionandIntegration 289
vii
Tables
2.1 TheJuly1stEconomicManagementImprovement
Measures:ComparisonofPracticesandPolicies
beforeandaftertheirImplementation page52
2.2 ComparisonofReformsinNorthKoreawiththose
inFormerSocialistCountries 54
2.3 NumberandPatternofSpotGuidanceInstances
PerformedbyKimJong-il,1994–2009 61
2.4 CharacteristicsoftheEconomicSystemsin
ThreeSocialistCountries:TheSovietUnion,China
andNorthKorea 68
2.5 AnnualGrowthRates,IndustrialStructureand
GDPPerCapitaofNorthKorea,1954–2013 74
2.6 EstimatesofAnnualGrowthRatesandGDPPer
CapitaofNorthKorea,1990–2013 84
2.7 NumberandGenderCompositionofNorth
KoreanRefugees(Persons,PerCent) 95
2.8 SummaryStatisticsofSurveyDataComparedwith
thePopulationCensus 97
2.9 ParticipationRatesintheOfficialandInformal
Economy 100
2.10 OfficialEconomicActivitiesofNorthKorean
Households 102
2.11 InformalEconomicActivitiesofNorthKorean
Households 104
2.12 InformalEconomicActivities:ComparisonofOur
SurveyswithPopulationCensus 105
2.13 AnnualNominalHouseholdIncomeofNorthKorean
RefugeesandShareoftheIncomeComponentsin
NorthKorea,2006–2009 108
viii
list of tables ix
2.14 AnnualAverageIncomePerCapitaofNorthKorean
Refugees,2006–2009(KPW,US$) 109
2.15 ShareofRespondentsWhoIdentifiedEachChannel
astheMostImportantforObtainingFood 112
2.16 ShareoftheRespondentsWhoIdentifiedEachChannel
astheMostImportantforObtaining
ConsumerGoods 114
2.17 ImportanceofChannelsforObtainingFood 117
2.18 ImportanceofChannelsforObtainingConsumer
Goods 118
A.2.1 EstimatedConsumerPriceIndexandInflationRates
inNorthKorea 122
2.19 RelianceofStateFirmsonMarkets 128
2.20 BusinessTypesofFirms 135
2.21 NumberofTradingFirmsDoingBusinesswithNorth
KoreabyInstitutionandTypeofOwner 137
2.22 CharacteristicsandPerformanceofFirmsDoing
BusinesswithNorthKorea 139
2.23 DeterminantsoftheCurrentProfitabilityofFirms
DoingBusinesswithNorthKorea 143
2.24 DeterminantsoftheExpectedProfitofFirmsDoing
BusinesswithNorthKorea 147
2.25 FutureoftheNorthKoreanEconomy(PerCent) 150
2.26 PredictabilityofLaws,PoliciesandRegulations
(PerCent) 152
2.27 AdherencetotheTermsoftheContract(PerCent) 154
2.28 AdvantagesandConstraintsinDoingBusiness
withNorthKorea 155
2.29 IntentiontoChangetheVolumeofBusinesswith
NorthKorea(PerCent) 158
2.30 ReasonsforGivingBribes 185
2.31 MainBribe-Takers 187
2.32 TrendsintheShareofSpendingonBribesasa
ProportionofTotalExpenditures 189
x list of tables
3.1 ProsandConsofBig-BangandGradualism 220
3.2 TheFeaturesofChineseTransitioninComparison
withEasternEuropeanTransition 245
3.3 ComparisonofWagesofNorthKoreanWorkers 256
3.4 TheExperiencesofUtilisingBanksandInformal
CreditofNorthKoreanRefugees 267
3.5 CasesofUnificationandIntegration 279
3.6 ProposedPoliciesatEachStageofTransitionand
Integration 290
3.7 VariousEstimatesofUnificationCostsofthe
TwoKoreas 294
3.8 VariousEstimatesofBenefitsofUnificationof
theTwoKoreas 295