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The Costs and Benefits of Korean Unification

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  • Marcus Noland

    ()
    (Peterson Institute for International Economics)

  • Sherman Robinson

    (Peterson Institute for International Economics)

  • Li-Gang Liu

    (Peterson Institute for International Economics)

Abstract

Existing estimates of the costs of unification are inadequate for a number of reasons. In this paper we use a dynamic computable general equilibrium model to calculate South Korean and total peninsular income streams under a variety of unification (and non-unification) scenarios. We find that there is a scenario in which the present discounted value of South Korean income is higher with unification than without it. Although lower income groups in South Korea experience reduced incomes under this scenario, with redistribution of the gains, everyone can be made better off. Indeed, this scenario, which involves relatively low levels of South Korean private investment in the North together with relatively high levels of North-South migration, is also the one which generates the highest level of total peninsular income as well. The latter point is critical in that it suggests that there is no necessary conflict between the economic interests of North and South Koreans after unification.

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP98-1.

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Date of creation: 1998
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Handle: RePEc:iie:wpaper:wp98-1

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Cited by:
  1. Funke, Michael & Strulik, Holger, 2005. "Growth and convergence in a two-region model: The hypothetical case of Korean unification," Journal of Asian Economics, Elsevier, vol. 16(2), pages 255-279, April.
  2. Marcus Noland & Sherman Robinson & Li-Gang Liu, 1997. "The Economics of Korean Unification," Working Paper Series WP97-5, Peterson Institute for International Economics.
  3. Sung Min Mun & Byoung Hark Yoo, 2012. "The Effects of Inter-Korean Integration Type on Economic Performance: The Role of Wage Policy," International Economic Journal, Taylor & Francis Journals, vol. 26(3), pages 447-470, September.
  4. Noland, Marcus & Robinson, Sherman & Wang, Tao, 2000. "Modeling Korean Unification," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 400-421, June.

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