"North Korea’s Per Capita GNI at 1.72 Million Won... Income Polarization Worsened After Drought"

BOK Economic Research by the Bank of Korea

North Korea's Per Capita GNI among World's Lowest… 29 Times Lower Than South Korea

Share of Unofficial Market Grows, but Lack of Legal and Institutional Framework Deepens Polarization

Extreme Drought Shock Further Intensifies Income Disparity

While North Korea’s per capita Gross National Income (GNI) remains among the lowest in the world, the Bank of Korea has found that income polarization has intensified further since the extreme drought more than a decade ago.

The proportion of economic activity taking place in the unofficial “Jangmadang economy”—North Korea’s informal market system—has grown since the official rationing system collapsed. However, a lack of supporting legal and institutional safeguards for this market expansion has contributed to worsening wealth disparity.

People wearing masks are bustling back and forth at the Jangmadang Market in Hyesan City, Yanggang Province, North Korea. Photo by Yonhap News Agency

On August 23, the Bank of Korea’s Economic Research Institute published these findings in its report “BOK Economic Research: Quasi-Marketization and Income Polarization in North Korea, Case Study of 2014-2015 Economic Shock.” The report was authored by Associate Research Fellow Cho Yongshin of the Economic Security Research Division.

According to the Bank of Korea’s estimates, North Korea’s nominal per capita GNI in 2024 is 1.72 million won, which is 29 times lower than South Korea’s. This places North Korea at a level comparable to the World Bank’s “low-income group” classification (for countries with a per capita income of $1,175 or less as of last year).

The research team analyzed that income polarization in North Korea was significantly exacerbated in the wake of an exogenous shock—namely, the severe drought over 10 years ago.

Using data from surveys by the Seoul National University Institute for Peace and Unification Studies conducted between 2011 and 2020 on North Korean defectors, the study examined whether there were meaningful changes in income distribution after exogenous economic shocks, with a particular focus on the lower-income groups.

The analysis confirmed that North Korea’s unofficial income polarization became statistically more severe after the exogenous shock (2015–2019) compared to the period preceding it (2011–2014). For both periods combined, the overall polarization index was calculated at 0.2548, with the lower polarization index at 0.3572 and the upper polarization index at 0.1523. In other words, following the extreme drought of 2014–2015, the level of unofficial income polarization intensified by about 25.5 percentage points, driven primarily by households in the middle-income bracket falling into lower-income status.

Notably, when isolating changes in the distribution by removing median effects, the relative density for the bottom 10 percent increased by more than 4.5 times compared to before the shock. The analysis has found that this elevated polarization persisted for a significant period even after recovery in North Korea’s market economy following the initial economic shock.

The report noted that lower-income groups are more vulnerable to exogenous shocks such as drought because the North Korean economy is characterized by a unique dual structure—one official and one unofficial.

Since the collapse of the socialist rationing system due to a severe economic crisis in the mid- to late-1990s, North Korea has seen the proliferation of a “Jangmadang economy,” centered on direct transactions of agricultural products between producers and consumers, particularly in rural areas. What began as small informal markets expanded during the 2000s into large comprehensive marketplaces, with traded goods expanding to include ordinary consumer products. In recent years, market mechanisms have reportedly been operating for production factors such as labor and capital as well. According to related research, it is estimated that ordinary citizens now rely on the informal market sector for approximately 70% of their total income.

However, despite the broad expansion of market activities, legal and institutional safeguards backing fair competition, taxation, distribution systems, or private property rights have not been established. As a result, the study points out that North Korea’s “quasi-marketization” is marked by economic opportunities being distributed unequally according to political connections or access to capital.

Associate Research Fellow Cho stated, “These results show that under the current quasi-marketized conditions, exogenous economic shocks can serve as opportunities for relatively well-off groups with strong political ties and easy access to capital to increase economic gains through rent-seeking and risk-free arbitrage. Conversely, for those with weaker economic foundations in the lower and lower-middle classes, such shocks can result in directly absorbing the impact, yielding asymmetric outcomes.”

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