Integration in the absence of institutions: China-North Korea cross-border exchange

► The paper is based on an unprecedented survey of firms operating in North Korea. ► Chinese firms have negative appraisals of the North Korean business environment. ► This encourages enterprises to hedge, limiting financial and expropriation risk. ► Corruption is common; predation may discourage the expansion of economic activity. ► Improvements in the institutional environment could generate large welfare gains.