The Challenge of Corruption Control in a Post-Unification Korea: Lessons from Germany and the former Soviet Bloc

Abstract

Although the current corruption in North Korea is keeping potential resistance and social disruptions under control, it may not be beneficial for North Korea’s economic development in the long-term. The most important reason is that the bribery, which is part of a daily life in North Korea, is rampant and is not functionally helpful to the economy as it does not contribute to formal sector in raising the supply of goods and services but rather remains within informal markets. Moreover, because bribery itself is highly common aspect of lives in North Korea, it takes a significant portion of household spending, which could be spent elsewhere for more productive uses if it could be avoided. Nevertheless, there is a fine equilibrium among dictators, authorities, and market participants that maintains the balance of the corruption system in place. In this backdrop, the present study examines whether this social change in North Korea is expected to break in the long-term as the corrupt relationship between authorities and market participants can no longer be contained by the dictator, resulting in destruction of the system and making transition to market economy.