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

Stephan Haggard and Marcus Noland

Asian Economic Journal, 2018, vol. 32, issue 3, 277-299

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.

Date: 2018
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https://doi.org/10.1111/asej.12159

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Working Paper: Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration (2012)
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