Openness and Growth in North Korea: Evidence from Time--Series Data

New growth theories suggest that an economy"s increased openness raises domestic productivity, and hence must have a positive effect on the living standards of a nation. The North Korean economy, isolated from world trade for several decades and its economy devastated, provides a test for this implied causality. The possibility that the ultimate source of declining real gross national product since 1974 is a decrease in trade liberalization of the North Korean economy cannot be rejected. The results are more definitive when the sample is split into two subperiods, pre--1974 and post--1974. These findings are generally consistent with the conventional model in which free trade stimulates economic growth. Copyright Blackwell Publishing Ltd. 2003