Going Beyond Economic Engagement: Why South Korea Should Press the North on Labor Standards and Practices

by Marcus Noland, Peterson Institute for International Economics

April 2014

In recent years, South Korea has been a major investor in North Korea, and South Korean firms have employed more than 50,000 North Korean workers. The hope has been to use economic engagement to lessen the North's direct state control over the economy and to encourage greater internal opening. This transformational vision however rests on unexamined assumptions about the impact of employment on North Korean behavior. New results from a groundbreaking survey of South Korean employers indicate that the North Korean government has limited its citizens' exposure both to South Koreans and to market-oriented economic practices. South Korean investment in North Korea may benefit the firms and workers involved, but evidence of broader spillovers is lacking. A South Korean campaign organized around workers' rights would complement economic engagement to increase the positive spillovers from South Korean employers in the North.

Data disclosure: The data underlying this analysis are available here [xlsx].

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