The Distribution of Income in North Korea | PIIE

The Distribution of Income in North Korea | PIIE




The Distribution of Income in North Korea
Marcus Noland (PIIE)
February 19, 2013 6:45 AM


A couple of months ago, the KDI School of Public Policy and Management put out a paper by Kim Taejong and Kim Ji-Hong which uses a 2005 KDI survey of 700 North Korean refugees to generate estimates of the distribution of income in North Korea, focusing on the period 1996-2003.

Kim and Kim are well-aware of the challenge of deriving a sample representative of the remaining resident population and the problem of recollection bias. They attempt to deal with these issues in part by trimming their sample of outliers, and re-weighting their sample using a question that asked the respondents about their self-assessment of their position on the income distribution. In short, the exercise faces some significant methodological challenges and the authors employ some clever responses that should bias their results in a conservative direction.

The authors describe the results as “mind-boggling.” The estimated Gini coefficients, a standard measure ranging from 0 to 1, with 1 being the most unequal, range from 0.63 in 1998 to 0.86 (2002-03). As the authors observe, if these trimmed sample “estimates are to be believed, one might consider North Korea as the country with the most unequal distribution in the world.”

The authors then re-weight the sample using the inverse of the self-perceived quintile on the income scale. Depending on the particular model they use, they are able to dampen the results somewhat, generating estimated Gini coefficients of 0.58-0.60 for 1998, and then showing a rise to the range of 0.66 to 0.85 during the period 2002-04. Even if one considers the low end estimates around 0.6, that would still put North Korea in a league with Brazil, the Central African Republic, Sierra Leone, and Swaziland—the most unequal countries in the world covered by contemporaneous World Bank data. As Kim and Kim observe, “even more alarming, of course, is the strong possibility that even these unusually high values of Gini coefficients are likely to understate the true state of income distribution in North Korea.”

It is unclear how these estimates might relate to current situation. Obviously a lot has changed in the intervening decade. But Kim and Kim are congratulated for making a serious effort to get at a little understood issue. The results underscore a basic point sometimes lost in socialist rhetoric, namely that a political system as repressive and unaccountable as North Korea’s enables inequality on a scale seen in few if any other countries.