Country survey XVIII: The two Koreas' defence economy

This country survey briefly outlines the defence and economic background of the two Koreas and the security environment in the Korean Peninsula. It shows how defence spending to deter a potential North Korean attack has crowded-out the South Korean civilian economy and considers the possibility of arms control between the two adversaries. The military capabilities of both countries are described and empirical results are presented on the arms race between the two Koreas since 1963 using a Richardson action-reaction model. The development of South Korean defence industries and the problems of those industries are also examined, as well as the future prospects for inter-Korean relations and South Korea's defence policy.