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

Stephan Haggard, Jennifer Lee and Marcus Noland

Journal of Asian Economics, 2012, vol. 23, issue 2, 130-145

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: 2012
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Citations: View citations in EconPapers (10)

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Working Paper: Integration in the Absence of Institutions: China-North Korea Cross-Border Exchange (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:23:y:2012:i:2:p:130-145

DOI: 10.1016/j.asieco.2011.08.005

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