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From a Disaster to a Miracle: Suggestions for North Korea
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- Authors
- Issue Date
- 2016-11-10
- Citation
- Seoul Journal of Economics, Vol.29 No.4, pp. 439-456
- Keywords
- North Korean economy ; Ownership ; Escape from Malthusian trap
- Abstract
- Utilizing a model of income and population growth specialized to a dual-class (master-slave) economy, we show that the lack of ownership for the majority of people may have been the main culprit why North Korea has remained stagnant in the past. The slave-workers, for whom ownership (and freedom) is denied, end up with a subsistent level of income. However, the masters, who own not only property but also slaves, end up with a big income. When the slave-workers are liberated to become property owning free people, their income will increase far above the subsistent level. However, the former master-owners income will shrink sharply. Knowing this fact, masters have strong incentives to maintain the slavery and slaves have equally strong incentives to overturn it. If a binding commitment can be made, under which the masters free the slaves and the freed slaves give back portions of their increased income to their former masters, a smooth transition to a free economy can be engineered.
- ISSN
- 1225-0279
- Language
- English
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