Modelling the Economic Impacts of Korean Unification

45 Pages Posted: 18 Apr 2017

See all articles by Warwick J. McKibbin

Warwick J. McKibbin

Australian National University

Jong-Wha Lee

Korea University

Weifeng Liu

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Cheol Song

Korea University

Date Written: April 17, 2017

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.

Keywords: Korean unification, North Korea, economic integration, dynamic general equilibrium, economic growth, convergence

JEL Classification: F15, H77, O19, O23, O53

Suggested Citation

McKibbin, Warwick J. and Lee, Jong-Wha and Liu, Weifeng and Song, Cheol, Modelling the Economic Impacts of Korean Unification (April 17, 2017). CAMA Working Paper No. 30/2017 . Available at SSRN: https://ssrn.com/abstract=2954337 or http://dx.doi.org/10.2139/ssrn.2954337

Warwick J. McKibbin (Contact Author)

Australian National University ( email )

Crawfrod School of Public Policy
Canberra, ACT 2600
Australia
02-61250301 (Phone)
02-62735575 (Fax)

HOME PAGE: http://www.sensiblepolicy.com

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Weifeng Liu

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

Crawford School of Public Policy
Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://cama.crawford.anu.edu.au/

Cheol Song

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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