The Economics of Reunification

The term “reunification” can be defined as a process of forming one united country from two or more countries that had been separated by internal or external causes. Based on this definition, South Korea and North Korea, and China and Taiwan, can be considered as separated nations that aim to achieve reunification.

Approaching the reunification problem from an economic perspective, we always face issues related to costs. Various types of costs arise when two different regimes are integrated with each other. We can refer to German reunification as the most recent example, but, as Korea’s situation is dissimilar in a number of ways, the types and the amounts of the costs will be different. Korea now has an opportunity to formulate an efficient reunification process as it has learned a great deal from German reunification during the past decades. This means that the benefits of reunification, not just the costs, can now be given proper consideration. Approaching the reunification problem from an economic viewpoint can be understood as a process of creating maximum benefits with the least cost. This article attempts to analyze and identify those costs and benefits and so better illuminate the path toward reunification.