Integration in the Absence of Institutions: China-North Korea Cross-Border Exchange
AbstractTheory 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 InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP11-13.
Date of creation: Aug 2011
Date of revision:
economic integration; property rights; institutions; transition; China; North Korea;
Other versions of this item:
- Haggard, Stephan & Lee, Jennifer & Noland, Marcus, 2012. "Integration in the absence of institutions: China–North Korea cross-border exchange," Journal of Asian Economics, Elsevier, vol. 23(2), pages 130-145.
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
- P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
- F15 - International Economics - - Trade - - - Economic Integration
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-CIS-2011-08-09 (Confederation of Independent States)
- NEP-TRA-2011-08-09 (Transition Economics)
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