A Unified Korea Is Depressing
I had depressing conversations with several Korean economists about the possibility of eventual Korean unification. Unlike Germany, where the East was only 1/4 the size of the West, and where GDP/capita in the West was perhaps only double that of the East, North Korea’s population is over 1/3 that of the South, and the South has a GDP/capita over 10 times that of the North.
Even if it were ever politically possible, economic integration — difficult in Germany as it was — would be an economic mess in Korea. With a free flow of labor one could well imagine a huge Northern depopulation — as its relatively abundant low-skilled labor flows to the capital rich, high-wage South.
That’s not going to happen; but perhaps the model is already in place. The North Korean border city of Gaesung has been designated an industrial area open to Southern investment, with jobs being created for Northerners. If labor can’t flow, capital can, and that can equalize prices of labor in the two Koreas, raising living standards in the North. Assuming politics allow (always iffy here), there may be hope for economic rationalization without unification.