• Journal of Labour Economics
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• v.44 no.2
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• pp.33-69
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• 2021

This study estimates the employment relationship of domestic and foreign workers by establishing 16 municipal and provincial panel data for the period 2010-2018. It attempts to analyze industry-specific (manufacturing and construction), scale-specific (5-29, 5-29, 5-299 and 5 above) and uses the foreign worker's national share (foreigner's concentration index) as an instrumental variable to control the endogeneity of foreign workers. Finally, it compares the results of panel GLS, which does not consider the endogeneity of foreign workers, with the results using instrumental variable method that considers it. As a result of the analysis, the complementary relationship between domestic and foreign workers was confirmed in the panel GLS analysis. However, although the employment relationship between domestic and foreign workers was not statistically significant in the instrumental variable method, the analysis of the combination of manufacturing and construction industry showed a statistically significant substitute relationship. This study is highly regarded for the first time in Korea that an instrumental variable method was created to identify and control the endogeneity of foreign workers in estimating employment relationships between domestic and foreign workers.