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

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  • 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.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:asieco:v:23:y:2012:i:2:p:130-145
    DOI: 10.1016/j.asieco.2011.08.005
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    Cited by:

    1. 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.
    2. Justin V Hastings & Sarah G Phillips & David Ubilava & Andrey Vasnev, 2022. "Price Transmission in Conflict-Affected States: Evidence from Cereal Markets of Somalia," Journal of African Economies, Centre for the Study of African Economies, vol. 31(3), pages 272-291.
    3. Marcus Noland, 2019. "North Korea: Sanctions, Engagement and Strategic Reorientation," Asian Economic Policy Review, Japan Center for Economic Research, vol. 14(2), pages 189-209, July.
    4. Haggard, Stephan & Noland, Marcus, 2013. "Gender in Transition: The Case of North Korea," World Development, Elsevier, vol. 41(C), pages 51-66.
    5. 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.
    6. 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.
    7. Haggard, Stephan & Noland, Marcus, 2016. "Hard Target: Sanctions, Inducements, and the Case of North Korea," MPRA Paper 105812, University Library of Munich, Germany.

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    More about this item

    Keywords

    Economic integration; Property rights; Institutions; Transition; China; North Korea;
    All these keywords.

    JEL classification:

    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions
    • P33 - Political Economy and Comparative 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

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