International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks

63 Pages Posted: 20 Jul 2006 Last revised: 2 Jan 2023

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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

Date Written: June 2006

Abstract

Millions of households in developing countries receive financial support from family members working overseas. How do migrant earnings affect origin-household investments? 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. These positive income shocks lead to enhanced human capital accumulation and entrepreneurship in migrants' origin households. Child schooling and educational expenditure rise, while child labor falls. In the area of entrepreneurship, households raise hours worked in self-employment, and become more likely to start relatively capital-intensive household enterprises.

Suggested Citation

Yang, Dean and Yang, Dean, International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks (June 2006). NBER Working Paper No. w12325, Available at SSRN: https://ssrn.com/abstract=912435

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