The Microeconomics of North--South Korean Cross-border Integration

Stephan Haggard and Marcus Noland

International Economic Journal, 2012, vol. 26, issue 3, 407-430

Abstract: Economic integration between North and South Korea occurs through three modalities: traditional arm's-length trade and investment, processing on commission (POC) trade, and operations within the Kaesong Industrial Complex (KIC). In order, these three modalities are characterized by decreasing exposure of South Korean firms to North Korean policy and infrastructure. Through a survey of 200 South Korean firms operating in North Korea we find that these modalities of exchange matter greatly in terms of implied risk. For example, firms operating in the KIC are able to transact on significantly looser financial terms than those outside it. We find that direct and indirect South Korean public policy interventions influence these different modalities of exchange and thus impact entry, profitability, and sustainability of South Korean business activities in the North. In effect, the South Korean government has substituted relatively strong South Korean institutions for the relatively weak Northern ones in the KIC, thus socializing risk. As a result, the level and type of cross-border integration observed in the survey is very much a product of South Korean public policy.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/10168737.2012.707872 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Microeconomics of North-South Korean Cross-Border Integration (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:26:y:2012:i:3:p:407-430

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2012.707872

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().