Assessing the economic performance of North Korea, 1954–1989: Estimates and growth accounting analysis

Abstract

This paper adjusts the official data from North and South Korean sources, taking into account hidden inflation to estimate North Korea's GNP growth rates from 1954 to 1989. The factors of economic growth are decomposed subsequently into changes in inputs and factor productivity. Finally, a panel cointegration technique is used to assess the level of productivity in the North Korean economy in comparison with that of the former Soviet Union. We find that the average of annual growth rates of North Korean GNP and GNP per capita from 1954 to 1989 was 4.4 and 1.9%, respectively. The results from decomposition suggest that the prime cause of slow economic growth was extremely low or even negative total factor productivity. According to the panel cointegration estimation, productivity in North Korea was lower than that of the Soviet Union by 33%. Journal of Comparative Economics 35 (3) (2007) 564–582.