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Integration in the absence of institutions: China–North Korea cross-border exchange

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Author Info

  • Haggard, Stephan
  • Lee, Jennifer
  • Noland, Marcus

Abstract

Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, we consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erode and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 23 (2012)
Issue (Month): 2 ()
Pages: 130-145

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Handle: RePEc:eee:asieco:v:23:y:2012:i:2:p:130-145

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Web page: http://www.elsevier.com/locate/asieco

Related research

Keywords: Economic integration; Property rights; Institutions; Transition; China; North Korea;

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References

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  1. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  2. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November.
  3. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August.
  4. Haggard, Stephan & Noland, Marcus, 2010. "Reform from below: Behavioral and institutional change in North Korea," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 133-152, February.
  5. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  6. Marcus Noland & Stephan Haggard, 2011. "Witness to Transformation: Refugee Insights into North Korea," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4389.
  7. Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 202-31, April.
  8. Haggard, Stephan & Noland, Marcus, 2009. "Famine in North Korea Redux?," Journal of Asian Economics, Elsevier, vol. 20(4), pages 384-395, September.
  9. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
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  11. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 637-58, October.
  12. Clay, Karen, 1997. "Trade, Institutions, and Credit," Explorations in Economic History, Elsevier, vol. 34(4), pages 495-521, October.
  13. Stephan Haggard & Marcus Noland, 2010. "The Winter of Their Discontent: Pyongyang Attacks the Market," Policy Briefs PB10-1, Peterson Institute for International Economics.
  14. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
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Cited by:
  1. Stephan Haggard & Marcus Noland, 2012. "The Microeconomics of North-South Korean Cross-Border Integration," Working Paper Series WP12-9, Peterson Institute for International Economics.
  2. Marcus Noland & Stephan Haggard, 2012. "Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration," Working Paper Series WP12-8, Peterson Institute for International Economics.
  3. Marcus Noland, 2014. "Going Beyond Economic Engagement: Why South Korea Should Press the North on Labor Standards and Practices," Policy Briefs PB14-12, Peterson Institute for International Economics.

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