Determinants of Economic Growth in Transition Economies: Implications for Economic Reform in North Korea

Abstract

Instability in the North Korean economy and regime stands out as one of the most important challenges for the South Korean economy. However, despite the significance and severity of the issue, there is presently a comparative lack of research on the potential for change in the North Korean economy, or policy preparedness in the event it occurs. The purpose of this study is to suggest policy measures that would support the successful transition of the North Korean regime. To this end, the study estimates the determinants of economic growth of both market economies and transition countries. Furthermore, the study examines the characteristics of economic growth determinants by income level and draws implications for North Korea’s transition to a market economy. Based on theoretical and empirical analysis, this study brings North Korea’s transition and economic growth issues into the spotlight to elicit policy measures for the regime’s economic growth, while at the same time suggesting the general direction for inter-Korean economic cooperation on the part of the South Korean government.