Korean Economic Integration: Prospects and Pitfalls

Brown, Max St.; Choi, Seung Mo; Kim, Hyung Seok

doi:10.1080/10168737.2012.707875

Cited by 10 publications

(5 citation statements)

References 9 publications

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“…They argue that with fiscal transfer from South to North Korea, the productivity level of North Korea can increase quickly, reducing its gap with that of South Korea. St. Brown et al () also build a growth model of productivity catchup, and show that the economic consequences of unification hinge critically on speed of productivity convergence, labor migration from North to South Korea, and capital flows from South to North Korea to South Korea.…”

Section: Introductionmentioning

confidence: 99%

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Modeling the Economic Impacts of Korean Unification

McKibbin¹,

Lee

Liu

et al. 2018

Asian Economic Journal

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This paper explores the economic impacts of Korean unification on North and South Korea. It presents a new consistent database on macroeconomic, sectoral and trade data, and an input-output table for the North Korean economy, and then incorporates it in a global intertemporal multi-sector general equilibrium model. Assuming hypothetical scenarios such as North Korea's reform and gradual convergence, its sudden collapse and immediate unification, and chaos and crises in both Koreas, we quantify the consequences of Korean unification on economic activity, trade and capital flows in the two Koreas. The results highlight the importance of the unification processes and of alternative policy responses in both Koreas to the economic impacts of unification.

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Section: Introductionmentioning

confidence: 99%

“…Previous studies, such as Funke and Strulik () and St. Brown et al (), assume faster speed of convergence of North Korea's productivity to South Korea's when the two Koreas integrate. They assume significantly larger capital transfers from North Korea to South Korea or technology transfers.…”

mentioning

confidence: 95%

Modeling the Economic Impacts of Korean Unification

McKibbin¹,

Lee

Liu

et al. 2018

Asian Economic Journal

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“…St. Brown et al () build a growth model with productivity catch‐up in which the parameters are estimated from the German unification, and use the model to study the impacts of Korean unification. The baseline scenario of integration assumes that the productivity of North Korea converges gradually to 0.75 of the productivity of South Korea, South Korea suffers from a 15% loss in total factor productivity, the labor migration per year is 0.5% of North Korean population, and capital transfer is 4% of the gross domestic product (GDP) in South Korea for the first 15 years and 2% for another 14 years.…”

Section: Introductionmentioning

confidence: 99%

Korean Unification: Economic Adjustments under German Assumptions

Lee¹,

McKibbin

2019

Asian Economic Policy Review

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This paper explores the impact of unification on North and South Korea under the hypothetical scenario that German-type reunification occurs in the Korean peninsula. Simulation results using a global dynamic general equilibrium model show that with comprehensive market-oriented reform and opening, the North Korean economy could capitalize on its growth potentials. Unification can reduce the growth rate in South Korea for a certain period following the unification shock due to the transfer of resources out of the South into the North and an increase in risk on the Korea peninsula. Due to the relative sizes in population and per capita gross domestic product of the two Koreas, unification can be more disruptive on North and South Korea, compared to the experience of Germany. The critical factors determining the economic effects of unification are the nature of wage-adjustment, the size of resource transfers from the South to North, and exchange rate policy.

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“…Lee et al (), exemplifying the case of Fujian Province in China, which has achieved economic catch‐up mainly due to Taiwanese investments, argue that North Korea can accomplish economic catch‐up through FDI from South Korea. St. Brown et al () and Choi and Brown () analyze total factor productivity (TFP) catch‐up between the two Koreas based on the experience of the German unification. Using a growth model of productivity catch‐up, they show that, when the two Koreas are unified, a slowdown in TFP growth is predicted to have persistent negative effects on South Korea, although North Korea would benefit from more rapid income growth.…”

Section: Introductionmentioning

confidence: 99%

North Korea’s Economic Integration and Growth Potential

Lee¹,

Pyun

2018

Asian Economic Journal

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The growth projections based on cross-country evidence show that North Korea could achieve higher economic growth in the long run if it embarks on substantial policy reforms toward a market-oriented and open economy. Using an empirical gravity model of trade and direct investment, we forecast that, when the two Koreas pursue economic integration and cooperation without military conflicts, North Korea's trade with South Korea can increase by up to 36 percent of North Korea's GDP and its foreign direct investment (FDI) flows from South Korea by up to 6 percent of GDP. Overall, by promoting trade and FDI integration with South Korea, North Korea can boost its GDP growth by approximately 3 percentage points per year. Combined with a market-oriented reform, the North Korean economy could grow by approximately 4.7 percent per year over the coming decades. Conversely, if more rigid sanctions imposed on North Korea become effective, its trade and investment will decrease and its GDP growth rate is expected to fall by approximately 2 percentage points per year.

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Korean Economic Integration: Prospects and Pitfalls

Cited by 10 publications

References 9 publications

Modeling the Economic Impacts of Korean Unification

Modeling the Economic Impacts of Korean Unification

Korean Unification: Economic Adjustments under German Assumptions

North Korea’s Economic Integration and Growth Potential

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