Author: Jiyoung Choi(BOK)

The expansion of the informal sector is one of the most representative changes in North Korean economy since the 2000s. This paper estimates a social accounting matrix(SAM) that distinguishes between formal and informal activities of North Korea during the year of 2013 in order to understand its dual economic structure. As the estimation results, the share of informal sector in North Korea is estimated at 18.5% for factor income and 28.5% for final demand.
Also, it indicates the production inducement effect of the informal sector in both household consumption and investment based on the Input-Output analysis. Increasing informal investment expenditure could contribute to encouraging the entire North Korean economy because the output multiplier of investment expenditure is much higher than that of household spending.
Lastly it is worth to note that these estimation results are based on relatively rough assumptions due to the limited statistics of North Korean economy. Therefore, the results could be changed in case different assumptions are introduced regarding informal economic activities in North Korea.