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Ordinary North Korean citizens have been coping with economic hardship by eking out livelihoods for themselves. Grassroots markets and local petty economies have become commonplace. A point of conjecture amongst scholars and policymakers is whether these developments may be the start of significant economic system change towards a market economy. This article reviews lessons learned from the transition economies about the informal and social processes required to effectively realize major economic transitions in order to discuss the preliminary evidence we have about North Korea's current informal civilian economic activity. Applying a social cognition theory of institutional change focuses our attention onto the discretionary behavior of local government, the social structure and networks that form firms and exemplars, and the social trust needed to move to new economic paradigms. It also discusses what the operations of hwa-gyo entrepreneurs, ethnic Chinese living in North Korea, pose to the existing state of the literature.
