Modeling Inter- Korean Economic Integration

Marcus Noland and Sherman Robinson

Journal of Economic Integration, 1998, vol. 13, 426-463

Abstract:

We construct the Korean Integration Model (KIM), a two-country com - putable general equilibrium (CGE) model linking the North and South Kore - an economies. Using KIM, we simulate the impact of a customs union and a monetary union of the two economies both in the presence and absence of crossborder factor mobility. Factor mobility is of critical importance. If factor mar - kets do not integrate, the macroeconomic impact on South Korea of economic integration with the North is relatively small, while the effects on North Korea are large. With a monetary union and factor market integration, there is a sig - nificant impact on the South Korean income and wealth distribution. If invest - ment flows from South to North and labor flows from North to South, there is a shift in the South Korean income distribution toward capital, and within labor toward urban high skill labor, suggesting growing income and wealth inequali - ty in the South.

Keywords: Modeling; Inter-Korean; Economic; Integration (search for similar items in EconPapers)
JEL-codes: F15 O53 P33 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0081

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