| Preface | xi |
| Acknowledgments | xv |
1 | Introduction | 1 |
| Divergent Paths | 3 |
| Three Crises | 4 |
| Prospects for the Future | 7 |
| Tour de Horizon | 11 |
2 | The South Korean Economy until 1997 | 15 |
| Economic Policy in the 1960s | 16 |
| Economic Policy in the 1970s | 19 |
| Economic Policy under President Chun | 22 |
| The Democracy Pledge and Twenty-five Years of Development | 24 |
| Pre-Crisis Economic Policy, 1987 to 1997 | 29 |
| Conclusions | 57 |
3 | The North Korean Economy | 59 |
| Organization of the North Korean Economy | 61 |
| Statistical Comparison of the North and South Korean Economies | 73 |
| Crisis Response | 82 |
| International Economic Relations | 87 |
| Current Reforms | 133 |
| Conclusions | 140 |
4 | The Nuclear Confrontation | 143 |
| The Energy Situation | 143 |
| The Nuclear Program | 145 |
| The Agreed Framework | 151 |
| The Suspect Site and the Missile Test | 158 |
| Evaluation | 166 |
5 | The Slow-Motion Famine in the North | 171 |
| The Food Balance | 180 |
| Food for Peace | 182 |
| The People's Republic of Misery | 191 |
6 | The Financial Crisis in the South | 195 |
| Financial Frugality | 199 |
| The Bubble Story | 203 |
| The Crisis | 208 |
| Post-Crisis Developments | 221 |
| Recovery | 247 |
| Conclusions | 249 |
7 | The Prospect of Successful Reform in the North | 251 |
| Reform in the North | 252 |
| A General Equilibrium Perspective on Reform | 266 |
| The Likelihood of Reform | 281 |
8 | The Implications of North Korean Collapse | 285 |
| The German Experience | 286 |
| Relevance to Korea | 295 |
| A General Equilibrium Perspective on Collapse and Absorption | 301 |
| Conceptualizing the Costs and Benefits of Unification | 307 |
| Dynamic Results | 310 |
| Policy Lessons of the German Experience for South Korea | 318 |
| Thinking Beyond the German Case | 320 |
9 | Can the North Muddle Through? | 323 |
| Socialism in One Family | 324 |
| Muddling Through in Our Own Style | 333 |
| Sustainability | 342 |
10 | Conclusions | 347 |
| North Korea | 348 |
| South Korea | 352 |
| Other Actors | 367 |
| Final Thoughts | 375 |
| References | 377 |
| Appendix | 401 |
| Index | 405 |
| Tables | |
Table 2.1 | South Korean tariff rates | |
Table 2.2 | Estimate of tariff-equivalents of Korean agricultural NTBs, 1992 | |
Table 2.3 | Producer subsidy equivalents, 1997 | |
Table 2.4 | Effective and nominal rates of protection, selected sectors, 1990 | |
Table 3.1 | North Korea's central plans | |
Table 3.2 | Composition of output, 1992-96 | |
Table 3.3 | Government budget balance | |
Table 3.4 | General government revenues, 1996 | |
Table 3.5 | Socioeconomic indicators, 1992 | |
Table 3.6 | Educational attainment rates | |
Table 3.7 | Distribution of labor force at time of reform | |
Table 3.8 | Capital stock and GDP regressions | |
Table 3.9 | International income and capital stock comparisons, 1990 | |
Table 3.10 | Ratio of South Korean to North Korean GDP per capita income, 1990 | |
Table 3.11 | North Korean trading partners, 1997 | |
Table 3.12a | North Korean exports by largest commodity groups, 1997 | |
Table 3.12b | North Korean imports by largest commodity groups, 1997 | |
Table 3.13 | Aid from the USSR | |
Table 3.14 | Aid balance sheet | |
Table 3.15 | Estimated remittances | |
Table 4.1 | KEDO contributions | |
Table 5.1 | Food balance estimates | |
Table 5.2 | Rice and corn per capita daily rations | |
Table 5.3 | Food for talks | |
Table 6.1 | Volatility of macroeconomic indicators and banking aggregates | |
Table 6.2 | South Korean banks | |
Table 7.1 | Alternative reform scenarios | |
Table 7.2 | Actual and "natural" North Korean trade shares, 1990 | |
Table 7.3 | Prospective sectors of comparative advantage | |
Table 7.4 | Prospective sectors of comparative advantage | |
Table 7.5 | Prospective sectors of comparative advantage | |
Table 8.1 | Western goods penetration | |
Table 8.2 | East German relative price | |
Table 8.3 | Inter-German and inter-Korean exchange | |
Table 8.4 | Estimated costs of unification | |
Table 9.1 | Romanian macroeconomic indicators | |
| Figures | |
Figure 2.1 | Financial development | |
Figure 2.2 | Real interest rates | |
Figure 2.3 | Share of GDP due to top 10 chaebol | |
Figure 2.4 | Purchasing power adjusted real GDP per capita | |
Figure 2.5 | Structure of output | |
Figure 2.6 | Exports and imports as a share of nominal GDP | |
Figure 2.7 | Unionized workers and labor disputes | |
Figure 2.8 | Number of days required for customs clearance of agricultural products | |
Figure 2.9 | Foreign direct investment | |
Figure 3.1 | Estimates of North Korean GDP | |
Figure 3.2 | North Korean trade | |
Figure 3.3 | North Koran arms trade | |
Figure 3.4 | North Korean debt and debt service - export ratio | |
Figure 3.5 | North Korean debt prices in the secondary market | |
Figure 3.6 | Number of South Koreans who visited the North | |
Figure 6.1 | Saving, investment, and the current account | |
Figure 6.2 | Capital inflows by type | |
Figure 6.3 | Unit price of electronics and DRAMS | |
Figure 6.4 | South Korea's nominal exchange rate and stock market changes | |
Figure 6.5 | South Korea's real GDP growth forecast and expected real exchange rate change | |
Figure 7.1 | Model simulation results | |
Figure 7.2 | Food availability | |
Figure 7.3 | Output by sector | |
Figure 7.4 | Relative price of output by sector | |
Figure 7.5 | Percent change in average factor price | |
Figure 8.1 | Capital inflow and exchange rate appreciation | |
Figure 8.2 | External capital flow: composition of output change in South Korea | |
Figure 8.3 | External capital flow: composition of output change in North Korea | |
Figure 8.4 | Rate of convergence and capital investment requirement | |
Figure 8.5 | North Korea: GDP and GNP | |
Figure 8.6 | South Korea: GDP and GNP | |
Figure 8.7 | Factor return equalization | |
Figure 8.8 | South Korean distribution of income | |
Figure 9.1 | North Korean and Romanian growth rates | |
| Boxes | |
Box 2.1 | The Strange Case of Sausages | |
Box 3.1 | Juche as Theology | |
Box 3.2 | A Tale of Juche Agriculture | |
Box 3.3 | Black, Brown, and Blue Won | |
Box 3.4 | Deadbeat Debtor | |
Box 3.5 | The Narco-state | |
Box 5.1 | Crying Wolf? | |
Box 5.2 | The Issue of Military Stockpiling | |
Box 5.3 | "9/27 Camps" | |
Box 5.4 | Refugees | |
Box 6.1 | Moral Hazard, the Domestic Dimension | |
Box 6.2 | Contagion | |
Box 6.3 | Moral Hazard, the International Dimension | |
Box 6.4 | Shareholder Activism | |
Box 6.5 | The 10-11 Crisis: The Shoe That Didn't Drop | |