Exogenous Effects of Paths of Institutional Change and Adaptive Informal Institutions in China and North Korea

China and North Korea's communist parties initially built their institutions with Soviet economic aid. Though these institutions facilitated the process of solidifying one-party rule in China and North Korea, the two countries' marketization has taken a different path. Unlike China, which had managed a gradual and stable marketization process, changes in North Korea's economic system have been driven by several unintended-but related-domestic factors such as a weakened central rationing system, the proliferation of black markets, and a weakened national pricing system. North Korea has attempted to absorb its informal markets into formal ones through some measures, but it has repeatedly returned to employing market control mechanisms. This article seeks to explain why the two socialist countries, China and North Korea, which were both receiving political and economic support from the Soviet Union when they established their respective institutions, pursue such different paths of institutional reform.