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<p>We examine the potential impacts of North Korea’s upgraded highway infrastructure on the Korean economies, taking a dynamic computable general equilibrium approach. The results show that the proposed North Korean highway upgrading project, costing US$58&#xa0;billion, can have significant pro-growth effects on North Korea’s economy, promoting annual growth by ≤ 14.3% over a 30-year period. Investment-led stimulus accounts for a dominant share of the total growth effects, while the contributions of trade openness and highway network effects are either marginal or even negative. In contrast, the project has negligible effects on South Korea’s economy, promoting annual growth by only 0.1%. In particular, if South Korea is financially responsible for the project, the investment cost required substantially exceeds the benefit the South can enjoy, resulting in a negative net present value of the project from its perspective (a loss of up to US$15&#xa0;billion). Such one-sided benefits lower the feasibility of the project, raising the need for additional incentives, such as reduced institutional barriers to inter-Korean trade.</p>

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Impacts of Upgraded North Korean Highway Infrastructure on the Korean Economies

  • 期刊论文

  • 发表日期：

    2026年7月9日

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  • Euijune Kim,
  • Kyung-Min Nam,
  • Seulki Kim

摘要

We examine the potential impacts of North Korea’s upgraded highway infrastructure on the Korean economies, taking a dynamic computable general equilibrium approach. The results show that the proposed North Korean highway upgrading project, costing US$58 billion, can have significant pro-growth effects on North Korea’s economy, promoting annual growth by ≤ 14.3% over a 30-year period. Investment-led stimulus accounts for a dominant share of the total growth effects, while the contributions of trade openness and highway network effects are either marginal or even negative. In contrast, the project has negligible effects on South Korea’s economy, promoting annual growth by only 0.1%. In particular, if South Korea is financially responsible for the project, the investment cost required substantially exceeds the benefit the South can enjoy, resulting in a negative net present value of the project from its perspective (a loss of up to US$15 billion). Such one-sided benefits lower the feasibility of the project, raising the need for additional incentives, such as reduced institutional barriers to inter-Korean trade.