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

Dean Yang

NBER Working Paper No. 12325
Issued in June 2006
NBER Program(s):International Finance and Macroeconomics, International Trade and Investment, Labor Studies

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.

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Document Object Identifier (DOI): 10.3386/w12325

Published:

• Yang, Dean. "Why Do Immigrants Return To Poor Countries? Evidence From Philippine Migrants' Responses To Exchange Rate Shocks," Review of Economics and Statistics, 2006, v88(4,Nov), 715-735.
• Yang, Dean. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630. citation courtesy of

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