Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 26, No. 4, pp.433-452
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2013
Received 03 Jun 2013 Revised 31 Oct 2013 Accepted 04 Nov 2013

Initial Conditions, Economic Performance, and Reform Prospects in North Korea

Hyung-Gon Jeong
Senior Research Fellow, Korea Institute for International Economic Policy, Seocho-ku, Seoul, Korea, Tel: +82-2-3460-1127, Fax: +82-2-3460-1125 hgjeong@kiep.go.kr

JEL Classification: F59, P20

Abstract

This study aims to predict the possible changes in the North Korean economic system by examining 27 countries that have experienced economic transition since 1990. This study divides the 27 transition countries into three groups (i.e., outstanding, fine, and poor transition) through discriminant analysis based on the outcomes of economic reforms over the past two decades. The discriminant analysis reveals that North Korea can be classified into the poor transition group and is likely to follow the pattern of the Commonwealth of Independent States. Pyongyang must realize that transition from its rigid socialist economy to a market economy is the only way to escape from poverty.

Keywords:

North Korea (DPRK), Economic transition

Acknowledgments

This study is based on “The Current Situation of Marketization in North Korea and Prospects for Changes in Its Economic System,” a Korea Institute for International Economic Policy (KIEP) report published in Korean by Jeong, H. G., et al. in 2012. The author of the current study thanks two anonymous referees and the editor of this journal, whose patience with an earlier version of this paper is greatly appreciated. Their suggestions have significantly improved this paper. Errors in this paper are the responsibility of the author.

References

  • Borensztein, E., Berg, A., Zettelmeyer, J., and Sahay, R. The Evolution of Output in Transition Economies: Explaining the Differences. IMF Working Paper, WP/99/73, 1999.
  • Cerović, B., and Nojković, A. “Transition and Growth: What was Taught and What Happened” Economic Annals LIV (No. 183 2009): 7-31.
  • DeMelo, Martha., C. Denizer, Cevdet A. Denizer, Alan H. Gelb, and Stoyan. Tenev. Circumstance and Choice. World Bank Policy Research Working Paper No. 1866, 1997.
  • European Bank for Reconstruction and Development. Transition Report 2009: Transition in Crisis?. London: European Bank for Reconstruction and Development, 2009.
  • Falcetti, E., Raiser, M., and Sanfey, P. “Defying the Odds: Initial Conditions, Reforms and Growth in the First Decade of Transition.” Journal of Comparative Economics 30 (No. 2 2002): 229-50.
  • Fischer, S., and Sahay, R. The Transition Economic after Ten Years. National Bureau of Economic Research Working Paper 7664, 2000.
  • Fischer, S., Sahay, R., and Carlos, Vegh “Stabilization and Growth in Transition Economies: the Early Experience.” Journal of Economic Perspectives 10 (No. 2 1996): 45-66.
  • Fisher, R. A. “The use of multiple Measurements in Taxonomic Problems.” Annals of Eugenics 7 (No. 2, 1936): 179-88.
  • IMF. Transition Economies: An IMF perspective on Progress and Prospects. IMF, 2000.
  • Jeong, Hyung-gon, Byung-Yeon Kim, and Suk Lee. “The Current Situation of Marketization in North Korea and Prospects for Change of Its Economic System.” World Economy Update 3 (No. 10 2013).
  • Jeong, Hyung-Gon. What can North Korea Learn from Transition Economies’ Reform Process?, KIEP Working Paper 09-04, 2009.
  • Kim, Byung-Yeon, and Song, Dongho. “The Participation of North Korean Households in the Informal Economy: Size, Determinants, and Effect.” Seoul Journal of Economics 21 (No. 2 2008): 361-85.
  • Krueger, Gary, and Marek Ciolko. “A Note on Initial Conditions and Liberalization during Transition.” Journal of Comparative Economics 26 (No. 4 1998): 718-34.
  • Lee, Young-Sun, and Jeong, Hyung-Gon. “The Determinants of Economic Growth of Transition Economies: Economic Reform vs. Initial Conditions.” International Economic Journal 20 (No. 2 2006): 241-52.
  • New York Times (Korea). “North Korea May Take Action to Jolt Economy, Analysts Say” April 28, 2013.
  • Roland, Gerard. “Transposable and Non Transposable Lessons from the Transition Experience.” Seoul Journal of Economics 21 (No. 2 2009): 265-83.
  • Statistics Korea. Population in North Korea and Population Census Analysis. Statistics Korea, 2011.
  • Stiglitz, Joseph E. Whither Reform? Ten Years of the Transition. Paper presented at the World Bank Annual Conference on Development Economics, Washington, DC, 1999.

Web sites

  • http://www.bok.or.kr/broadcast.action?menuNaviId=2236, (Bank of Korea)
  • https://www.cia.gov/library/publications/the-world-factbook/geos/kn.html, (CIA 2012The World Fact book)
  • https://www.cia.gov/library/publications/the-world-factbook/geos/kn.html, ,(UN COMTRADE statistics. Since UN statistics does not include North Korea’s GDP per capita (PPP), CIA statistics was used instead)