Economic Systems in North and South Korea

[Provisional, subject to change]

Summer 2008 Professor Chung LEE

12:40 - 2:20 p.m. MTWTh Office: Woodang Hall #504

428 LP-POSCO Building Office Hours: To be determined

This course is designed for students who would like to learn about the economic systems in North and South Korea and how they have performed in creating the wealth of nation (or failed to do so). Problems relating to North Korea’s transition to a market economy and the unification of the two Koreas will also be discussed. It is assumed that the students enrolled in this course have at least taken introductory courses in economics and are familiar with the basic concepts and theories about markets and the market economy.

Attendance requirements

It is expected that students attend all classes and read all assigned readings prior to class. The instructor will assign students to make classroom presentations on various topics and selected readings. “Students must fulfill 48 classroom hours during the six week terms to obtain academic credit at KU.”

Course grade

Grades are based on attendance and class participation (20%), presentation (30%), and a term paper (50%).

Term paper

Students are required to form groups of two (or three in exceptional cases) to work on a joint term paper and consult with the instructor in choosing their paper topics. A one-page outline of a proposed topic must be submitted by Monday of the second week of instruction. A five-page review of the literature is due by Thursday of the third week and the 15-page (typed, double spaced, excluding endnotes, bibliography, and graphs and tables) term paper is due at the ISC Office by Tuesday of the sixth week of instruction. Plagiarism is absolutely prohibited: the information, data, and/or ideas that are obtained from other sources for use in the paper must be cited and referred to. The term paper should identify the question to be addressed, discuss its relevance to the purpose of the course, critically evaluate the answers extant in the literature, and offer the answer of choice with reasons for the choice.

Topics and Readings

1. Introduction

Koo, Bon Ho and Jo, Dongho, “Comparative analysis of the North and South Korean economies” in Cho, Lee-Jay and Kim, Yoon Hyung (eds), Economic Systems in South and North Korea: The Agenda for Economic Integration, Korea Development Institute, Seoul, 1995. Available at http://www2.hawaii.edu/~lchung/ as “Economic Systems in South and North Korea – Koo & Jo

Gregory, Paul R. and Stuart Robert C., Comparative Economic Systems (2nd edition), Houghton Mifflin, Boston, 1985, 9-43

Frank, Ruediger, “Can Economic Theory Demystify North Korea,” Available at http://www2.hawaii.edu/~lchung/ [Use of some of the conventional theories to understand the N.K. economy]

2. Overview of the two economic systems: market v. plan

·  Resource allocation in a market economy: decentralized decision making

·  Plans and statistical information for resource allocation in a socialist planned economy: centralized decision making

·  Property rights—private, public, collective

Eberstadt, Nicholas, The North Korean Economy, Transactions Publishers, New Brunswick, 2007, pp.1-13, 127-57

Lee, Chung H., "Reunification of the Two Koreas: An Economic Agenda" in C. H. Lee and H. Reisen (eds.), From Reform to Growth: China and Other Countries in Transition in Asia and Central and Eastern Europe, Development Centre Documents, OECD Development Centre, Paris, 1994. Available at http://www2.hawaii.edu/~lchung/

(“Korea Reunification”)

Lee, Chung H., “Resource allocation system” in Cho and Kim (1995)

Frank, Ruediger, “Classical socialism in North Korea and Its Transformation: The role and the future of agriculture” www.asiaquarterly.com/content/view/172/43/

2.1. Rural economic system

Land ownership, Ch.3 in Cho and Kim (1995)

Frank, Ruediger, “Classical socialism in North Korea and Its Transformation: The role and the future of agriculture” www.asiaquarterly.com/content/view/172/43/

2.2. Money, Finance, and Financial system

Ch. 6 in Cho and Kim (1995)

2.3. Employment and wage system

Ch. 7 in Cho and Kim (1995)

3. Economic system of South Korea: An Open Market Economy

World Bank, The East Asian Miracle: Economic Growth and Public Policy, World Bank, 1993, 8-26 (Lee, Chung H., a book review of The East Asian Miracle in Seoul Journal of Economics, Vol. 8, No. 1, Spring 1995)

Rodrik, Dani, “Getting Interventions Right: How South Korea and Taiwan Grew Rich,” Economic Policy 20, 1995

Lee, Chung H., “The Government, Financial System, and Large Private Enterprises in the Economic Development of South Korea,” World Development, Vol.20, No.2, 1992

Lee, Chung H., “Chaebol, Financial Liberalization, and Economic Crisis: Transformation of Quasi-Internal Organization in Korea” (with Keun Lee and Kangkook Lee), Asian Economic Journal, Vol.16, No.1, 2002, 17-35. Available at http://www2.hawaii.edu/~lchung/ as Revised3LeePdf and Revised3LeeTables

Lee, Chung H., “Political Economy of Institutional Reform in Korea,” Journal of Asia Pacific Economy, Vol. 10, No. 3, 2005 Available at http://www2.hawaii.edu/~lchung/

Kim, Yoon Hyung, “An introduction to the Korean model of political economy” in Lee-Jay Cho and Yoon Hyung Kim (eds), Korea’s Political Economy: An Institutional Perspective, Westview Press, Boulder, 1994

[Presentation of term papers in progress]

4. North Korean economy—Planned Socialist Economy guided by Juche

Kim, Jong-il. 1997. “On preserving the Juche character and national character of the Revolution and Construction,” http://www.korea-dpr.com/library/111.pdf

Kim, Jong-il. 1982, “The guiding principles of Juche,” http://www3.cnet-ta.ne.jp/j/juche/pdf/e-works4.pdf

Frank, Ruediger, “Can economic theory demystify North Korea?” Available at http://www2.hawaii.edu/~lchung/

Frankel, Jeffrey and Romer, David, “Trade and Growth in East Asian Countries: Cause or effect,” NBER Working Paper No.5372. www.nber.org/papers/w5372.pdf

5. Transition from centrally planned to a market economy

5.1. Theoretical issues in transition: China v. East and Central Europe

Blanchard, Oliver, The economics of post-communist transition, Clarendon Press, Oxford, 1997

Naughton, Barry, The Chinese economy, MIT Press, 2007, pp.55-111

McMillan, John and Naughton, Barry, Reforming Asian Socialism: The growth of market institutions, University of Michigan Press, 1996, 273-296

Lee, Chung H. and Reisen, Helmut (eds), From Reform to Growth: China and Other Countries in Transition in Asia and Central and Eastern Europe, Development Centre Documents, OECD Development Centre, Paris, 1994

5.2. North Korea’s transition to a market economy?

Lee, Doowon, “Lessons of transition economies’ reform for North Korea” in Doowon Lee (ed.), The System Transformation of the Transition Economies: Europe, Asia and North Korea, Yonsei University Press, Seoul, 1997

Frank, Ruediger, “Economic reforms in North Korea (1998-2004): systemic restrictions, quantitative analysis, ideological background,” Journal of Asia Pacific Economy, Vol. 10, No. 3, 2005. Available at http://www2.hawaii.edu/~lchung/

Liu Ming, “North Korean Economy Reform: an Uncertain Future for a Third-Way Exploration in Joint U.S.-Korea Academic Studies, Vol.16, 2007, Korea Economic Institute. www.keia.org/2-Publications/2-3-Monograph/2007/10.Ming.pdf

Toloraya, George, “The economic future of North Korea: will the market rule,” Korea Economic Institute Paper Series, December 2007, Vol.2, no.10. www.keia.org/2-Publications/toloraya.pdf

Lee, Doowon, “Assessing North Korean economic reform: historical trajectory, opportunities, and constraints” Available at http://www2.hawaii.edu/~lchung/

[Term paper presentation]

6. Unification? In search of an optimal path to a unified Korea

Noland, Marcus, “The Economics of Korean Unification,” Working Paper 97-5, Peterson Institute of International Economics,

http://www.iie.com/publications/wp/wp.cfm?ResearchID=154

Noland, Marcus, “The costs and benefits of Korean Unification,” Working Paper 98-1, Peterson Institute of International Economics,

http://www.iie.com/publications/wp/wp.cfm?ResearchID=142

Lee, Chung H., "Toward Korean Unification: A Policy Proposal for Investment in North Korea" (with Kwang Soo Cheong), Journal of the Asia Pacific Economy, Vol.2, No.2, 1997, 144-157

Lee, Chung H., "Reunification of the Two Koreas: An Economic Agenda" in C. H. Lee and H. Reisen (eds.), From Reform to Growth: China and Other Countries in Transition in Asia and Central and Eastern Europe, Development Centre Documents, OECD Development Centre, Paris, 1994

Lim, Wonhyuk, “Inter-Korean economic cooperation at a crossroads” in Joint U.S.-Korea Academic Studies, Vol.16, 2007, Korea Economic Institute. www.keia.org/2-Publications/2-3-Monograph/Monograph2007/12.Lim.pdf

Lee, Doowon, “Inter-Korean economic relations: rivaled past, unbalanced present, and integrated future” Available at http://www2.hawaii.edu/~lchung/

Potential paper topics

·  What can North Korea learn from the transition experiences of China?

·  What can North Korea learn from the transition experiences of East and Central Europe?

·  What are the lessons that the two Koreas may learn from the experience of German reunification?

·  Should South Korea help North Korea build its infrastructure capital?

·  Juche ideology and its economic consequences

·  Areas of economic cooperation between North and South Korea

·  Tourism in North Korea

·  Export processing zone in North Korea

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