Body
Transparency has become a hot topic in economic development though the links to desired outcomes such as faster economic growth are not always obvious. Two channels seem plausible. One is that transparency reduces informational asymmetries and contributes to greater efficiency. A second is through improved public accountability and governance. A plethora of cross-country time-series indices have emerged which try to quantify aspects of transparency (and governance). Some of these appear more tightly correlated with economic outcomes than others, though all may be measuring desirable societal characteristics.
In the current issue of the Journal of Comparative Economics, Andrew Williams creates some new indices that basically distill the informational content of the existing indices along the informational and public accountability dimensions. The two indices are highly, though not perfectly, correlated. The informational transparency index is linearly correlated with per capita income, but the correlation between per capita income and the accountability index is U-shaped. (This latter result is not as robust due to the influence of some Middle East and North African energy producers which combine high incomes with questionable accountability.)
Out of 187 countries in the sample North Korea’s average score for the whole 1980-2010 sample period places it in 186th place on informational transparency (besting Somalia) and dead last on accountability transparency.
To the credit of the Williams and the JCE, the data is downloadable. So produced below are a few charts illustrating the scores of North and South Korea over time (as well as the standard error ranges associated with the scores). Not surprisingly, South Korea scores far higher than North Korea on both the information transparency and accountability measures (as well as a composite index), its scores have risen over time (while the North’s have more or less remained constant), and in general the standard errors, or magnitudes of statistical uncertainty surrounding those scores, are less for South Korea than North Korea, and in the case of South Korea have been declining over time. (The North Korean standard errors on accountability are an exception. They are small--there is a consensus that North Korean public accountability stinks.)
In short, South Korea is more transparent than North Korea, it has been improving while the North has stagnated, and we can be increasingly confident of those conclusions.
