Prospects and Economic Impacts of Korean Unification: An Introduction

• Author: Marcus Noland,Warwick McKibbin,Jong‐Wha Lee
• DOI: http://doi.org/10.1111/asej.12161
• Published date: 01 September 2018
• Date: 01 September 2018

Prospects and Economic Impacts of Korean

Unification: An Introduction*

Jong-Wha Lee, Warwick McKibbin and Marcus Noland

Received 1 June 2018; Accepted 23 July 2018

doi: 10.1111/asej.12161

Since Korea was divided into South and North, it has not been able to establish

a strong foundation for bringing a peaceful end to the 70 years of division in the

Korean Peninsula. The catastrophic war in 1950–1953 involving the USA, the

United Nations (UN) and China ended with an armistice agreement but not with

a peace settlement.

The two Koreas have followed very different development paths. South Korea

has experienced strong economic growth and transformed into a democratic

society. North Korea remains the most isolated, centrally planned communist

country in the world. The North Korean economy has been stagnant and its

income gap with South Korea has widened. Its average economic growth over

the past decade was less than 1 percent and current per-capita income remains

only approximately $US1300, according to estimates by South Korea’s central

bank.

1

Despite considerable economic hardship, North Korea has developed its

nuclear weapons and missile programs. Tensions between North Korea and the

USA have risen to an unprecedented level since 2017, when North Korea

launched a number of intercontinental ballistic missiles and undertook a sixth

nuclear test. The USA and the UN took a tough stance against North Korea and

imposed tougher sanctions. Fears of military conflict on the Korean peninsula

continued to escalate as the USA warned of preemptive action against North

Korea. In turn, North Korea threatened countermeasures.

*Lee (corresponding author): Department of Economics, Korea University, 145 Anam-ro, Sung-

buk-gu, Seoul 02841, Korea. Email: jongwha@korea.ac.kr. McKibbin: Centre for Applied Macro-

economic Analysis, Crawford School of Public Policy, The Australian National University, Acton

ACT 2601, Australia and The Brookings Institution. Noland: Peterson Institute for International Eco-

nomics,1750 Massachusetts Avenue, NW Washington, DC 20036, USA and the East-West Center.

The authors gratefully acknowledge the sincere support and suggestions of Shandre Thangavelu

throughout the preparation of this special issue. This research is funded by a grant from the

Australian Research Council (DP150103821) and a National Research Foundation of Korea Grant

funded by the Korean Government (NRF-2008-362-A00001).

1 The data are available from the Bank of Korea’s Economic Statistics System (http://ecos.bok.or.

kr/flex/ClassSearch_e.jsp).

© 2018 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Asian Economic Journal 2018, Vol.32 No. 3, 221–225 221