[Vol.26 No.1] A Political Economic Analysis of Korean Reunification, Migration and Income Redistribution

구분
World Economy
등록일
2020.03.31
조회수
4513
키워드
담당부서
Economic Research Institute(02-759-5490)
첨부파일

Authour : Weh-Sol Moon(Seoul Women’s University)

This paper examines two different reunification regimes and investigates the decision making problems on tax and income transfers in a political economy model. The first reunification regime is the South-Driven regime under which the majority of South Korea choose the tax rate, the amount of transfers and the size of migration. The second is the North-Participation regime under which there is no limit on migration and the majority of Unified Korea choose the tax rate and the amount of transfers. In both regimes, Northern residents’ migration decisions are endogenous and those who decide not to migrate to the Southern region have an alternative to declare fiscal independence of income redistribution taking place within the North independently. This paper shows that there is no income redistribution in a politico-economic equilibrium under the South-Driven regime. Given that, those remaining in the Northern region decide to declare fiscal independence. On the other hand, the North-Participation regime delivers an equilibrium supporting income redistribution and no fiscal independence.

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