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International Migration, Human Capital, and Entrepreneurship: Evidence from Philippine Migrants' Exchange Rate Shocks


Dean Yang


University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Department of Economics

February 2005

World Bank Policy Research Working Paper Series No. 3578
University of Michigan, Ford School of Public Policy Working Paper No. 02-011

Abstract:     
Millions of households in developing countries receive financial support from family members working overseas. How do the economic prospects of overseas migrants affect origin-household investments - in particular, in child human capital and household enterprises? This paper examines Philippine households' responses to overseas members' economic shocks. Overseas Filipinos work in dozens of foreign countries, which experienced sudden (and heterogeneous) changes in exchange rates due to the 1997 Asian financial crisis. Appreciation of a migrant's currency against the Philippine peso leads to increases in household remittances received from overseas. The estimated elasticity of Philippine-peso remittances with respect to the Philippine/foreign exchange rate is 0.60. In addition, these positive income shocks lead to enhanced human capital accumulation and entrepreneurship in origin households. Favorable migrant shocks lead to greater child schooling, reduced child labor, and increased educational expenditure in origin households. More favorable exchange rate shocks also raise hours worked in self-employment, and lead to greater entry into relatively capital-intensive enterprises by migrants' origin households.

Number of Pages in PDF File: 53

Keywords: International migration, remittances, human capital, entrepreneurship, credit constraints, risk

JEL Classification: D13, F22, I2, I3, J22, J23, J24, O12, O15

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Date posted: July 28, 2005  

Suggested Citation

Yang, Dean, International Migration, Human Capital, and Entrepreneurship: Evidence from Philippine Migrants' Exchange Rate Shocks (February 2005). ; University of Michigan, Ford School of Public Policy Working Paper No. 02-011. Available at SSRN: http://ssrn.com/abstract=546483

Contact Information

Dean Yang (Contact Author)
University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )
440 Lorch Hall
611 Tappan Street
Ann Arbor, MI 48109
United States
734-764-6158 (Phone)
HOME PAGE: http://www.umich.edu/~deanyang/
National Bureau of Economic Research (NBER)
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Cambridge, MA 02138
United States
University of Michigan at Ann Arbor - Department of Economics
611 Tappan Street
Ann Arbor, MI 48109-1220
United States
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