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Networks, Trust and Trade: The Microeconomics of China–North Korea Integration

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  • Stephan Haggard
  • Marcus Noland

Abstract

A central hope of engagement with North Korea is that increased cross‐border exchange will encourage the strengthening of institutions and, eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although we cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state‐owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The results cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.

Suggested Citation

  • Stephan Haggard & Marcus Noland, 2018. "Networks, Trust and Trade: The Microeconomics of China–North Korea Integration," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 277-299, September.
    • Handle: RePEc:bla:asiaec:v:32:y:2018:i:3:p:277-299
    DOI: 10.1111/asej.12159
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    Cited by:

    1. Stephan Haggard & Marcus Noland, 2012. "The Microeconomics of North--South Korean Cross-border Integration," International Economic Journal, Taylor & Francis Journals, vol. 26(3), pages 407-430, September.
    2. 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.
    3. Jong‐Wha Lee & Warwick McKibbin & Marcus Noland, 2018. "Prospects and Economic Impacts of Korean Unification: An Introduction," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 221-225, September.

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    More about this item

    JEL classification:

    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • F15 - International Economics - - Trade - - - Economic Integration

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