Reform from below: Behavioral and institutional change in North Korea

The state is often conceptualized as playing an enabling role for economic development, providing public goods, such as the legal protection of property rights, with the political economy of reform conceived in terms of bargaining among elites or special interest groups. We document a case which turns this perspective on its head: efficiency-enhancing institutional and behavioral changes arising, not out of a conscious, top-down program of reform, but rather as unintended (and in some respects, unwanted) by-products of state failure. Responses from a survey of North Korean refugees demonstrate that the economy marketized in response to state failure with the onset of famine in the 1990s and subsequent reforms and retrenchments appear to have had remarkably little impact on at least some significant share of the population. There is strong evidence, however, of powerful social changes, including increasing inequality, corruption, and changed attitudes about the most effective pathways to higher social status and income. These assessments appear to be remarkably uniform across demographic groups. While the survey sample marginally over-weights demographic groups with less favorable assessments of the regime, even counterfactually re-calibrating the sample to match the underlying resident population suggests widespread dissatisfaction with the North Korean regime.