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Institutional Economic Integration between South and North Korea and the Economic Impacts of Integration

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  • Moonsung Kang
  • Soonchan Park

Abstract

This paper proves theoretically that bilateral trade between South and North Korea, between whom many political barriers to trade exist, is Pareto‐inefficient, and that a Pareto‐efficient situation can be achieved through the attainment of institutional economic integration, enabled by mutual agreement between South and North Korea. Based on our theoretical analysis, we propose a comprehensive economic integration agreement as an instrumental framework for the gradual integration of South and North Korea. In addition, we analyze the economic impacts of such integration. We estimate that gradual integration would positively affect North Korean GDP, increasing it by 3.55–4.88 percent from the baseline, depending on the various scenarios we analyze.

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  • Moonsung Kang & Soonchan Park, 2018. "Institutional Economic Integration between South and North Korea and the Economic Impacts of Integration," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 257-276, September.
    • Handle: RePEc:bla:asiaec:v:32:y:2018:i:3:p:257-276
    DOI: 10.1111/asej.12158
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    Cited by:

    1. Fuzhong Chen & Guohai Jiang, 2021. "Investigating the Impact of Institutional Quality on FDI: Are There Promotional Effects in Economic Integration Regions?," Sustainability, MDPI, vol. 13(20), pages 1-16, October.
    2. Jong‐Wha Lee & Warwick McKibbin & Marcus Noland, 2018. "Prospects and Economic Impacts of Korean Unification: An Introduction," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 221-225, September.

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