Chapter 9 of The Escape from Oppression and Poverty: A Developmental History of Korea

This chapter models North Korea as a Solow economy to measure the role of different causes driving the country’s growth underperformance vis-a-vis South Korea. Counterfactual experiments show that North Korea’s nonperformance resulted primarily from productivity failure from 1958-
2018, with the disintegration of the Soviet Union and high defense burden aggravating the failure. These findings align with the outcomes from
experiments using a Ramsey model calibrated to stand for South Korea and subjected to North Korean shocks. The productivity performance gap
resulted primarily from North Korea’sfailure to shed misallocation as rapidly South Korea did.

Keywords: North Korea; total factor productivity; savings; defense burden