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Modelling the Economic Impacts of Korean Unification

Author

Listed:
  • Warwick J. McKibbin
  • Jong Wha Lee
  • Weifeng Liu
  • Cheol Jong Song

Abstract

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 three 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.

Suggested Citation

  • Warwick J. McKibbin & Jong Wha Lee & Weifeng Liu & Cheol Jong Song, 2017. "Modelling the Economic Impacts of Korean Unification," CAMA Working Papers 2017-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-30
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-02/30_2017_mckibbin_lee_liu_song.pdf
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    Cited by:

    1. Shagdar, Enkhbayar & Nakajima, Tomoyoshi, 2020. "Economic Impacts to Be Brought by the DPRK’s Return to International Society: CGE Analysis with the GTAP 9A Data Base," Conference papers 333199, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    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.
    3. Moon, Weh-Sol & Mun, Sung Min & Lee, Jong-Kyu, 2018. "Macroeconomic impact of Korean reunification: The role of factor market opening," Journal of Asian Economics, Elsevier, vol. 58(C), pages 36-58.
    4. Christian Agu & Jonathan Emenike Ogbuabor & Benjamin Udoka Onah, 2025. "How are Economic Governance Institutions Moderating the Effect of Economic Complexity on Trade, FDI Inflow, Environmental Degradation, and Economic Growth in Africa?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 9536-9567, June.
    5. Jesús Crespo Cuaresma & Olha Danylo & Steffen Fritz & Martin Hofer & Homi Kharas & Juan Carlos Laso Bayas, 2020. "What do we know about poverty in North Korea?," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 6(1), pages 1-8, December.

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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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