Analysis of the Financial Behaviors of North Korean Refugees in South Korea

Abstract

North Korean refugees born and raised under the socialist economy have faced challenges in adapting to the advanced consumer financial market in South Korea. We construct individual-level panel data on the refugees and native-born individuals sharing similar characteristics in terms of demographic and economic variables using the Korean credit bureau (CB) data. Panel analysis reveals a significantly higher number of delinquencies by the refugees than the native-born control group. These findings suggest that the lack of financial knowledge stemming from prolonged residence in a socialist society has a negative impact on defectors’ financial adaptation in South Korea. However, as the length of credit history which is a proxy of financial literacy increases, the number of delinquencies of the refuges drops much faster than that of the control group. Additional support, such as financial education, must therefore be considered to facilitate economic integration for the refugees.