Unification costs in Germany and Korea-a comparative perspectivea comparative perspective

다국어 초록 (Multilingual Abstract)

This paper discusses the unification costs of Germany and Korea in comparative perspective. In Germany it took 17 years before the public budget after unification has been for the first time in structural surplus. In terms of financial sustainability, East Germany remained a transfer economy dependent on transfers of around one third of its GDP for the foreseeable future. While convergence between East and West in terms of economic indicators had been initially strong, later this process stopped. In Korea, based on static calculations the unification burden might be even larger than in Germany, since the difference of the economic activity between both Koreas is much larger than in the German case. At the same time, pressure for rapid convergence might be even stronger than in Germany, based on income differences. However, this view tends to neglect the costs related to current division, as well in monetary as in human terms.