Question

In: Economics

North Korea and South Korea before separation were known for ethnic and linguistic homogeneity. Economically, the...

North Korea and South Korea before separation were known for ethnic and linguistic homogeneity. Economically, the two regions were also highly similar at the time of separation, with PPP GDP per person, in 1996 dollars, roughly equal to $700 in both regions. Yet, 50 years later, GDP per capita was 10 times higher in South Korea than in North Korea. What happened to the two countries for such a significant diversion in their economic trajectory? Please detail explanation.

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Expert Solution

There is indeed a lot of diversification in all the norms when two countries South and North Korea are considered. After the division of the countries, South Korea mainly focussed on the economic development where it came up with some really giants like Samsung etc. Even it took part in enhancing the globalisation trend where the growth in the economy flourished with huge capital investments in the country from all over the world. These norms enabled South Korea to develop in a drastic way. On the other hand , North Korea is known for its harsh internal and foreign policies where the people lacked freedom and poor relations with the other countries didn't allow the capital to flow. North Korea even invested most of its domestic income in strengthening the defence system which didn't add anything to the economy. Thus, the difference in approach between the countries created such a huge difference on the whole.


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