The Korean Journal of Economic Studies
Estimating Long-term Economic Growth and National Income in North Korea: 1956-1989
Taehyoung Cho (Bank of Korea) and Minjung Kim (Bank of Korea)Year 2021Vol. 69No. 1
This study estimates North Korea’s long-term economic growth rate from 1956 to 1989. After reconstructing production data series for major products such as grain, fabrics, coal, steel, electrical power, cement, etc., each industry’s GDP growth rate is estimated by linking relevant production data to that specific industry’s added value. Seven industries are considered:agriculture, forestry & fishing; mining; light industry; heavy chemical industry; electricity, gas & water supply; construction; and government services. Based on industry-specific growth rates, the growth rate for the total economy is computed using the chained Laspeyres index number formula. As a result, the North Korean economy is estimated to have grown on average at 4.7% annually from 1956 to 1989. This is roughly similar to the 4.2% for the same period suggested by Kim, Kim, and Lee (2007), a representative study in the field. By period, the economy achieved a high annual growth rate of 13.8% in the late 1950s, while it fell to the 4-5% range in the 1960s and further diminished to grow at a rate of 2-3% in the 1970s and 1980s. In other words,the economic growth of North Korea before 1990 can be interpreted as “one big jump.” By industry, mining and manufacturing grew at 7.3% annually over the whole period, while agriculture, forestry & fishing and services grew at 2.5%and 4.6%, respectively. The mining and manufacturing-centered growth in the economy resulted in excessive investment in the same industries and an imbalance in growth among all the industries. Meanwhile, this paper shows that South Korea’s per capita income, in terms of real GNI denominated in U.S.dollars, is estimated to have surpassed that of North Korea in the mid- to late 1960s. In addition, North Korea’s real GDP per capita grew relatively sluggishly compared to other socialist country cases