How to reduce korean unification costs: two region endogenous growth model with human capital

Abstract

The purpose of this thesis is to estimate unification costs of North and South Korea and to obtain economic implications of how to reduce its costs. Costs are calculated by present value of dynamics of government transfer from the South to the North, using two-region endogenous growth model with human capital. Considering lessons from German reunification case and the North and South Korea's situation, I set up plausible three scenarios and dates for Korean unification. As a result, the North's reform and open market policy as well as the South's cooperative stance substantially reduce total costs of Korean unification.