RESEARCH

The Part of Our World: North Korea’s Exposure to World Commodity Prices

SEWON PARK, Harvard College '21

THURJ Volume 13 | Issue 1

Abstract

This paper explores how responsive North Korean production activity is to global commodity prices. I use satellite
nighttime lights data, IMF reported world commodity prices, and data from the 38 North Digital Atlas over 1992-2013
to present three main findings. First, luminosity (a proxy for economic activity) in coal-producing counties in North
Korea is considerably responsive to increases in global coal prices. The same pattern is revealed for steel. I estimate a
0.957 world price elasticity of coal production and a 2.652 world price elasticity of steel production in North Korea,
both statistically significant at the 1% level. This empirically confirms how the North Korean regime has strategically
aligned its coal and steel production activity with global coal and steel price fluctuations, respectively. Second, our study
finds statistically significant, positive relationships between North Korean coal/steel exports to China and luminosity
in coal/steel-producing regions, potentially suggesting that luminosity reflects trade with China as well. Third, I found
no statistically significant nonzero relationship between Chinese producer prices and luminosity in commodity-specific
producing regions. This indicates that the DPRK-Chinese relationship is far less market-driven and more characterized
by geopolitical factors instead. These results demand a recalibration of our understanding of how North Korea maintains
its regime, nuclear activities, and evades sanctions through its integrated economy and trade activity.