Labor Repression, Democracy, and Growth in South Korea: Data Construction and Preliminary Results

Abstract

This paper examines how the democratic transition in Korea affected firm strategy through the changes in industrial relations. The existing studies have pointed out that it unleashed workers’ demand that had been suppressed by the authoritarian regime, though there was little disaggregated information regarding the “democratization shock.” We overcame the data problem by scrapping news articles and applying the Named Entity Recognition techniques to construct the labor dispute index. We find that labor disputes increased from the year of democratization, 1987, which is consistent with the previous literature. Reported labor disputes were concentrated in the heavy-chemical industries and the southeast industrial clusters. We use this variation to conduct an econometric analysis and find that establishments in a cell (industry x province) with a high labor dispute index increased productivity and capital intensity. Such effects were stronger for large establishments where unionized labor put more pressure.