Divergence before the division: The colonial origins of separate development paths in Korea

Abstract

This study revisits the question of what impact Japanese colonialism had on the long-term economic development of North and South Korea. Factor endowments, economic activity and economic performance are compared between the regions that later became parts of North and South Korea, respectively. The study finds that important elements of the economic history of the peninsula have not been sufficiently acknowledged in much of the influential literature that uses Korea as an illustration of theoretical claims of the root causes of development. In particular, the fact that the economic divergence of northern and southern regions could be traced back to different colonial treatments - especially after mid-1920s - has often been overlooked when analysing the divergent post-partition development trajectories. The study suggests, based on a sectoral similarities analysis, that the initial dissimilar economic performance of North and South can at least partially be found in differences in political economy and economic trajectories preceding the partition.