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Integration in the Absence of Institutions: China-North Korea Cross-Border Exchange

Marcus Noland, Stephan Haggard (shaggard@ucsd.edu) and Jennifer Lee
Additional contact information
Stephan Haggard: University of California, San Diego Graduate School of International Relations and Pacific Studies
Jennifer Lee: Eurasia Group

No WP11-13, Working Paper Series from Peterson Institute for International Economics

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.

Keywords: economic integration; property rights; institutions; transition; China; North Korea (search for similar items in EconPapers)
JEL-codes: F15 F36 P3 P33 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-cis and nep-tra
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Citations: View citations in EconPapers (2)

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Journal Article: Integration in the absence of institutions: China–North Korea cross-border exchange (2012) Downloads
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