How do people in authoritarian regimes adapt to external economic pressure? We examine how economic sanctions affect informal economic activity in North Korea. Using county-level data from 167 regions for the years 2016, 2018, and 2022, we find that informal economic activity significantly expanded in areas most affected by sanctions, particularly those reliant on heavy industry such as primary metals, machinery, and transportation. These bottom-up adaptations illustrate how citizens, rather than the state, absorb the shocks of international pressure. By tracing micro-level adjustments over time, our study sheds light on the uneven and indirect effects of sanctions in targeted countries. The findings highlight the need for more strategic, sector-sensitive sanction design and contribute to broader debates on the effectiveness of economic sanctions, authoritarian resilience, and economic coping mechanisms under constraint.
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