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A while back I had a post based on Bank of Korea figures titled “Is the North Korean economy shrinking?” Now Hyundai Research Institute is arguing that it is growing, indeed that it grew at 4.7 percent last year. My rule of thumb is to never trust a datum about the North Korean economy that comes with a decimal point attached, so I tracked down the study. Turns out that the HRI researchers ran a panel cross-country regression of per capita income levels on infant mortality data, then plugged in the North Korean figures to derive a counterfactual projection. Since the UN only publishes the data at five year intervals, the HRI team used grain harvest data, which they say has a correlation with infant mortality of -0.69 to interpolate the missing data. As one can see from the chart below, derived from one of the tables in their report, this technique generates an oddly smooth per capita income series.
So, did the North Korean economy grow by 4.7 percent last year? I doubt it. But their guess is probably as good as any. What is really striking about this chart is that all of the sources have per capita income today lower than it was twenty years ago. Indeed, according to the HRI estimate, North Korean per capita income first reached the level it attained last year in 1974!
