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Measuring the Economic Impact of Trade Sanctions: Evidence from North Korea

Date: Wednesday, Mar 22, 2023, 16:30 ~ 17:45
Speaker: Jihee Kim (KAIST)
Location: 우석경제관 223동 307호
Jihee Kim 교수님의 세미나가 있을 예정입니다. 

* 주관: 서울대학교 경제학부, 경제연구소 한국경제혁신센터, SSK, BK21

* 본 세미나는 BK21+(2023-1학기) 세미나 참석으로 인정됩니다.

세미나 참석인정을 원하는 학생은 세미나 종료 후 참석자 명단을 작성해주시기 바랍니다.


In this seminar, I will discuss the economic impact of the United Nations sanctions on North Korea. Using a novel dataset on North Korean firms, we first construct measures of county-level regional exposure to export and intermediate input sanctions. We then estimate the impact of these exposures on manufacturing production, which is calculated from nightlight intensity and Chinese GDP-nightlight elasticity. The reduced-fom estimation indicates that increasing a county’s export sanction exposure from the 25th to 75th percentile reduces its manufacturing GDP by 4.1%. Additionally, newly available product-level price data reveals that import sanctions led to significant increases in market prices. To further investigate the aggregate impact of the sanctions, we construct a quantitative spatial equilibrium model featuring multiple regions in North Korea. Using the estimates from the reduced-form regressions, we calibrate the model and infer the aggregate impact of the sanctions. The model suggests that the aggregate real output of the industrial sector in North Korea drops by 6.5% due to the export sanctions and by 13.4% due to both export and import sanctions. A counterfactual analysis of the model shows that imposing a full sanctions regime on all exports and imports will drastically reduce its manufacturing output by 45%. Lastly, I will present another descriptive study that can also help us understand post-sanction changes in North Korea, which utilizes grid-level economic statistics generated by applying machine learning to day-time satellite imagery.

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