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Growth and Convergence in a Two-Region Model: The Hypothetical Case of Korean Unification

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  • Mr. Michael Funke
  • Mr. Holger Strulik

Abstract

The paper discusses the impact and implications of Korean unification by setting up a two-region endogenous growth model. The numerical solutions are based on the formal analytical model, and have been calibrated so that they reflect the observed features of the North and South Korean economies. The numerical solutions provide evidence about the speed of convergence and the large amount of interregional transfers that are required to make the North Korean economy economically viable.

Suggested Citation

  • Mr. Michael Funke & Mr. Holger Strulik, 2002. "Growth and Convergence in a Two-Region Model: The Hypothetical Case of Korean Unification," IMF Working Papers 2002/026, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/026
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    Cited by:

    1. Paul Hare, 2012. "North Korea: Building the Institutions to Raise Living Standards," International Economic Journal, Taylor & Francis Journals, vol. 26(3), pages 487-509, September.
    2. 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.
    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. Bradford, Scott C. & Phillips, Kerk L., 2008. "The Economic Reunification of Korea: A Dynamic General Equilibrium Model," MPRA Paper 23550, University Library of Munich, Germany.
    5. Warwick J. McKibbin & Jong Wha Lee & Weifeng Liu & Cheol Jong Song, 2018. "Modeling the Economic Impacts of Korean Unification," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 227-256, September.
    6. Blum, Ulrich, 2011. "Can Korea Learn from German Unification?," IWH Discussion Papers 3/2011, Halle Institute for Economic Research (IWH).

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    More about this item

    Keywords

    WP; fiscal policy; Korean Unification; Regional Convergence; Economic Growt; government policy; policy rule; consumption-capital ratio; budget constraint; depreciation rate; economic development; government share; regime design; Income; Capital budget; Infrastructure; Wages;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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