KOREAN REUNIFICATION: HOW IT MIGHT COME ABOUT AND AT WHAT COST1

Abstract

This paper considers three broad scenarios for Korean reunification. These are reunification through system evolution and adaptation, through collapse and absorption and through conflict. A simulation model is used to estimate the costs of Korean reunification, which span a range between $50 billion and $700 billion, and a median estimate between $330 billion and $350 billion, about $60–70 billion per annum over five years. Various ways of distributing these investment costs are outlined and the likely benefits of reunification are also assessed. 1This paper is a revised and expanded version of a previous paper entitled, ‘Korean Reunification and Reconstruction: Circumstances, Costs, and Implications’ that was originally presented at a conference on ‘Regional Economic Implications of North Korean Security Behavior’ organized by the National Bureau of Asian Research, University of Washington, and the Institute of World Development, Development Research Center of the State Council of the People’s Republic of China, and held in Beijing, January 18–19, 2006. In turn, that prior paper drew heavily on a previous book, North Korean Paradoxes, Charles Wolf, Jr. and Kamil Akramov, RAND, MG‐333‐OSD, 2005.