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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 29, No. 4, pp.457-480
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2016
Received 26 Sep 2016 Revised 27 Oct 2016 Accepted 28 Oct 2016

The Evolution of the Informal Economy in North Korea

Byung-Yeon Kim ; Min Jung Kim
Byung-Yeon Kim, Department of Economics, Seoul National University, Seoul, Republic of Korea, Tel: +82-2-880-6370, Fax: +82-2-886-4231 kimby@snu.ac.kr
Min Jung Kim, Corresponding author, SSK Research Group for Research on Innovation and Competition for the Advancement of the Korean Economy, Sogang University, Seoul, Republic of Korea dearmj@snu.ac.kr

JEL Classification: J22, J24, O17, P20

Abstract

This paper uses a survey of North Korean refugees to investigate the evolution of informal economic activities of North Korean households. We find little evidence of increases in informal economic activities in terms of the aggregate participation rate in the informal economy from 1996 to 2009. However, service and manufacturing activities in the informal economy increased during 2005–2009 at the sacrifice of informal agricultural activities. Evidence shows that labor productivity has improved in the informal service sector, whereas the informal manufacturing sector has not experienced increases in productivity. These results imply that expansion of the informal service sector contributes to North Korea’s economic growth, but the lack of private property rights constrains the development of manufacturing.

Keywords:

North Korea, Informal economic activities, Labor productivity, Propensity score matching model

Acknowledgments

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2013S1A5A2A03044461).

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