The economic implications of Korean unification

Abstract

A major area of concern for Korean unification is the immense cost it will impose on South Korea. To lessen this burden, South Korea will need to initiate policy reforms that can ease the financial stress and repercussions of unification and create an integrated economic community with North Korea. At the same time, North Korea will need to create an environment that is conducive to economic integration by accepting and adopting reform measures that can build the foundation for a market economy. The two largest factors to any economic reform strategy in North Korea would be to overcome the changes to the political-belief system that drives the current economy and the strong link between the state and masses. A policy of engagement will create an environment in which inter-Korean dialogue and mutual cooperation could lead to a transformed, opened North Korea. The unification of Germany and Yemen offer pros and cons as well as similarities and dissimilarities to Korea to form certain conclusions, predictions, and prescriptions. The case studies of China and Vietnam provide a detailed analysis of planned economies transitioning to market economies. From these case studies, several conclusions are drawn regarding the implications of economic unification.