Labor disputes and direct foreign investment: The experience of Korea in transition

Economic Development and Cultural Change

Volumn 46, Issue 2, 1998, Pages 304-327

  Tcha, MoonJoong ^a  

^a UNIVERSITY OF WESTERN AUSTRALIA   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPING COUNTRY; FOREIGN DIRECT INVESTMENT; INVESTMENT DETERMINANTS; LABOUR DISPUTE;

KOREA(SOUTH);

EID: 0031832054     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452340     Document Type: Article

References (26)

1. See, e.g., Y. Shin, "Korean Direct Investment in Indonesia and Its Political Implications: A Critical View" (paper presented at the Centre for Strategic and International Studies, Jakarta, Indonesia, July 1992), and "Korea's DFI in the Third World," Creation and Criticism (Changjak gwa Bipyong) 21, no. 3 (Autumn 1993): 303-23; Y. Lee and M. Tcha, "The Political Economy of Korean DFI in Southeast Asia," in The Changing Capital Markets of East Asia, ed. C. Cao (London: Routledge, 1995), pp. 202-52; and M. Tcha, "Labor Disputes and Direct Foreign Investment," Seoul Journal of Economics 9, no. 2 (1996): 175-80.
2. See, e.g., Y. Shin, "Korean Direct Investment in Indonesia and Its Political Implications: A Critical View" (paper presented at the Centre for Strategic and International Studies, Jakarta, Indonesia, July 1992), and "Korea's DFI in the Third World," Creation and Criticism (Changjak gwa Bipyong) 21, no. 3 (Autumn 1993): 303-23; Y. Lee and M. Tcha, "The Political Economy of Korean DFI in Southeast Asia," in The Changing Capital Markets of East Asia, ed. C. Cao (London: Routledge, 1995), pp. 202-52; and M. Tcha, "Labor Disputes and Direct Foreign Investment," Seoul Journal of Economics 9, no. 2 (1996): 175-80.
3. See, e.g., Y. Shin, "Korean Direct Investment in Indonesia and Its Political Implications: A Critical View" (paper presented at the Centre for Strategic and International Studies, Jakarta, Indonesia, July 1992), and "Korea's DFI in the Third World," Creation and Criticism (Changjak gwa Bipyong) 21, no. 3 (Autumn 1993): 303-23; Y. Lee and M. Tcha, "The Political Economy of Korean DFI in Southeast Asia," in The Changing Capital Markets of East Asia, ed. C. Cao (London: Routledge, 1995), pp. 202-52; and M. Tcha, "Labor Disputes and Direct Foreign Investment," Seoul Journal of Economics 9, no. 2 (1996): 175-80.
4. See, e.g., Y. Shin, "Korean Direct Investment in Indonesia and Its Political Implications: A Critical View" (paper presented at the Centre for Strategic and International Studies, Jakarta, Indonesia, July 1992), and "Korea's DFI in the Third World," Creation and Criticism (Changjak gwa Bipyong) 21, no. 3 (Autumn 1993): 303-23; Y. Lee and M. Tcha, "The Political Economy of Korean DFI in Southeast Asia," in The Changing Capital Markets of East Asia, ed. C. Cao (London: Routledge, 1995), pp. 202-52; and M. Tcha, "Labor Disputes and Direct Foreign Investment," Seoul Journal of Economics 9, no. 2 (1996): 175-80.
5. For the classification of industries into labor-intensive and capital-intensive industries, see C. Lee and K. Lee, "A Transition Economy and Outward Direct Foreign Investment: The Case of South Korea," Seoul Journal of Economics 5, no. 1 (1992): 89-111.
6. Material published by the Bank of Korea (1995) includes more up-to-date data. However, it uses a less disaggregated classification for the size of investment. Therefore, only data up to 1990 are used for table 4.
7. Total amount invested in capital-intensive sectors in Asia is greater than that in labor-intensive sectors in absolute amounts; however, compared to North America, investment in Asia is relatively more oriented toward labor-intensive sectors.
8. Some parts in this section are more extensively discussed in Lee and Tcha.
9. See M. Tcha, "Labor Disputes and Direct Foreign Investment," Seoul Journal of Economics 9, no. 2 (1996): 175-80.
10. For an intensive survey of these theories, see K. Kumar and M. McLeod, Multinationals from Developing Countries (Lexington, Mass.: D. C. Heath, 1981).
11. See K. Froot and J. Stein, "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," Quarterly Journal of Economics 106, no. 4 (November 1991): 1191-1217.
12. See J. Harvey, "The Determinants of Direct Foreign Investment," Journal of Post Keynesian Economics 12, no. 2 (Winter 1989-90): 260-72.
13. It was suggested that the regressions should include measures of wage inflation on the right-hand side. Because of the extremely high correlation between wage and per capita GNP variables, per capita GNP must be excluded. Regression including wage level instead of per capita GNP provided remarkably similar results.
14. See L. Perry, "Measuring the Relationship between Trade Union Militancy and Wage Inflation in Australia: An Empirical Analysis: 1962-1976," Journal of Industrial Relations 20, no. 2 (June 1978): 191-201.
15. As figs. 1 and 2 show, some degrees of comovement between selected labor dispute measures and DFI are found even after 1987. It would be very helpful if regression is conducted with lagged variables to find accumulated lagged effects of Korea's explosive labor disputes since 1987. This analysis can be done when more observations are collected.
16. As shown in table 1, China was an insignificant destination of Korea's DFI until 1991. A notable increase of Korea's DFI in China since 1992 was considered in a test, which did not produce any significant effect and was therefore excluded. Another discrete increase of DFI in China took place in 1994, which explained about 40% of Korea's total DFI in the world. The reasoning behind this is too premature to be discussed at this stage.
17. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
18. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
19. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
20. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
21. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
22. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
23. Data used in this article are from E. Ahn, Korean DFI in the Manufacturing Sector, Research Material 92-2 (Seoul: Korean Export-Import Bank, 1992); International Monetary Fund, International Financial Statistics (Washington, D.C.: International Monetary Fund, 1972-95), and Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1972-95); Korea Foreign Trade Association, Major Statistics of the Korean Economy (Seoul: Korea Foreign Trade Assocation, 1995); National Statistical Office, Korean Economic Indicators (Seoul: National Statistics Office, 1995); and Bank of Korea, Economic Statistics Yearbook (Seoul: Bank of Korea, 1995), and Overseas Direct Investment Statistics Yearbook (Seoul: Bank of Korea, 1995).
24. Tests for stationarity of variables and a brief discussion on cointegration in the data are contained in the appendix.
25. All the variables used in this study are contemporaneous data. The investment figures used in this article represent the amount of investment and the number of projects actually invested in rather than approved. After the approval, investors are able to invest in foreign countries without delay whenever they want to. For this reason, I used contemporaneous rather than lagged variables. Alternatively, since there may be a time lag even after the approval, I also conducted analyses with lagged variables. They did not provide implicative results.
26. The results of diagnostic tests are available from me on request.