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The Economic Costs of Trade Sanctions: Evidence from North Korea

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  • Jihee Kim
  • Kyoochul Kim
  • Sangyoon Park
  • Chang Sun

Abstract

This paper investigates the economic costs of the recent United Nations sanctions on North Korea. Exploiting a novel data set on North Korean firms, we construct measures of regional exposure to export and intermediate input sanctions and show that trade sanctions cause sharp declines in local nighttime luminosity. Additional analysis of newly available product-level price data reveals that import sanctions led to significant increases in market prices. We then estimate a quantitative spatial equilibrium model using cross-region variations. The model implies that the sanctions reduced the country’s manufacturing output by 12.9% and real income by 15.3%. We further quantify the potential impact of alternative sanction scenarios.

Suggested Citation

  • Jihee Kim & Kyoochul Kim & Sangyoon Park & Chang Sun, 2023. "The Economic Costs of Trade Sanctions: Evidence from North Korea," CESifo Working Paper Series 10630, CESifo.
  • Handle: RePEc:ces:ceswps:_10630
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    Cited by:

    1. Donghyun Ahn & Jeasurk Yang & Meeyoung Cha & Hyunjoo Yang & Jihee Kim & Sangyoon Park & Sungwon Han & Eunji Lee & Susang Lee & Sungwon Park, 2023. "A human-machine collaborative approach measures economic development using satellite imagery," Nature Communications, Nature, vol. 14(1), pages 1-10, December.
    2. Zareei, Afsaneh & Wadensjö, Eskil, 2024. "Sanctions and Their Effects on the Labor Market and the Economy," IZA Discussion Papers 17467, Institute of Labor Economics (IZA).
    3. Daria Suprunenko, 2024. "Not-so-innocent bystanders: Trade with neighbors of sanctioned countries," IEER Working Papers 123, Institute of Empirical Economic Research, Osnabrueck University.
    4. Kiet Duong & Toan Huynh & Anh Phan & Nam Vu, 2024. "From Russia with Love: International Risk-sharing, Sanctions, and Firm Investments," Working Papers 119, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    5. Raul Caruso & Maria Cipollina, 2023. "The Effect of Economic Sanctions on World Trade of Mineral Commodities. A Gravity Model Approach from 2009 to 2020," DISCE - Working Papers del Dipartimento di Politica Economica dipe0034, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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    More about this item

    Keywords

    trade sanction; regional economy; spatial equilibrium; North Korea;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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