“Competitive Rent-Seeking” in the Kim Jong Un Era of North Korea

Abstract

This article presents the “Competitive Rent-Seeking Model” that accounts for how reform policies paved the way for sustainable economic growth in “authoritarian transition economies” despite widespread corruption. Competitive rent-seeking refers to the process whereby the entry barrier to rent-generating economic activities, once monopolized by a small number of vested interests, has been lowered inviting more potential rent-seekers into the system. This was accomplished by enacting decentralizing and market-friendly reform policies that in turn exacerbated corruption but boosted production efficiency leading to improved social welfare. The model is exemplified by the Chinese and Vietnamese experiences during the 1980s. Furthermore, this article demonstrates that the model is applicable to the North Korean economy under Kim Jong Un’s economic reform policy of the “Socialist System of Responsible Business Operation in Economic Management” initiated in 2014.