Growth and Convergence in a Two-region Model: the Hypothetical Case of Korean Unification
نویسندگان
چکیده
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. We also model the impact of foreign aid, migration and borrowing abroad for the transition process. Acknowledgement A previous version of the paper has been published as IMF Working Paper WP/02/26. Part of this research was undertaken while Michael Funke was a Visiting Scholar in the HongKong Institute for Monetary Research (www.hkimr.org) whose excellent research environment is gratefully acknowledged.
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