Effects of Human Capital on the Economic Adjustment of North Korean Defectors

Abstract

I. IntroductionAs of March 2016, more than 29,000 North Korean defectors are settled in South Korea (Ministry of Unification 2016); this group comprises 0.06% of the country's population. The number will exponentially increase if South and North Korea decide to integrate or unify their economies.According to the previous studies, North Korean defectors encounter difficulties when they resettle in South Korea (Jeon 2007; Yi et al. 2007; Yoon 2009). Despite government subsidies, unemployment rate and income considerably differ between South Korean citizens and North Korean defectors. In 2015, the unemployment rate of South Korean citizens was 3.6%, whereas that of North Korean defectors reached 4.8%; moreover, the average monthly wage of defectors was 1.55 million won, which was only 44% of the average monthly wage of South Koreans at 3.49 million won (Korea Hana Foundation 2016; Statistics Korea 2016). Additionally, the separation between these two groups and the differences in their economic and political experiences for 70 years may cause disparity in various aspects. A number of North Korean defectors experience mental or psychological trauma when settling in South Korea.The successful resettlement of North Korean defectors in South Korea is important for the welfare and integration of the two countries. The capability of North Koreans to adapt successfully and quickly to South Korean society can significantly reduce reunification cost. Otherwise, reunification cost and social discord between North and South Koreans can increase dramatically. Social conflicts may also indicate a possibility of political instability of reunified Korea.Important systematic studies on the adjustment of North Korean defectors in South Korea remain lacking. Even studies on the adaptation of immigrants have not reached a consensus on the key determinants of their outcomes (Yang 1994; Safi2010). Factors, such as self-selection of immigrants and the characteristics of their origin and settlement countries, complicate the issue. Apart from these challenges, research on North Korean defectors faces severe deficiencies in terms of data, which is detrimental for conducting quantitative research. Researchers also often fail to obtain sufficient information on the variables of defector experiences in South and North Korea. For example, the surveys of Korea Hana Foundation, the official institution that assists North Korean defectors in South Korea, only cover issues on their experience in South Korean society.The present study uses data of North Korean defectors obtained from a three-wave survey administered by a team of researchers from the Economics Department of Seoul National University. The survey was conducted in August 2011, May 2014, and June 2015 with respective participants of 132, 161, and 191.1 Seoul National University implemented the first wave, whereas Nielsen Korea conducted the last two. The sample of the first wave was constructed via snowball method through personal contacts. The sample population of the first wave is defectors aged 20 or older who leftNorth Korea within a year before the survey. The samples for the second and third waves were stratified by age, sex, and year of entry in South Korea. These samples were randomly drawn from the population of North Korean defectors aged 20 or older who lived in South Korea. Gang survey methodology was applied for all three waves to facilitate interviews with defectors living in the Metropolitan Seoul Area, including Gyeonggi Province.These surveys are unique questionnaires that include a comprehensive number of variables that may affect the adjustment of North Korean defectors to South Korean society. Experiences while living in North Korea and after arriving in the South were specifically explored. Economic variables, such as income, status of labor market participation, and subjective perception variables are also included in the survey.We contribute to existing literature in the following aspects. …