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

Authors


  • *

     A previous version of this article was titled ‘International Migration, Human Capital, and Entrepreneurship’. I have valued feedback from Kerwin Charles, Jishnu Das, John DiNardo, Hai-Anh Dang, Quy-Toan Do, Eric Edmonds, Caroline Hoxby, Larry Katz, Michael Kremer, Sharon Maccini, Justin McCrary, David Mckenzie, Ted Miguel, Ben Olken, Caglar Ozden, Dani Rodrik and Maurice Schiff; participants in seminars at UC Berkeley, Stanford University, University of Western Ontario, Columbia University, the World Bank and the Federal Reserve Bank of New York; audience members at the Minnesota International Economic Development Conference 2004 and the WDI/CEPR Conference on Transition Economics 2004 (Hanoi, Vietnam); and two anonymous referees. HwaJung Choi provided excellent research assistance. I am grateful for the support of the University of Michigan's Rackham Junior Faculty Fellowship, and the World Bank's International Migration and Development Research Program.

Abstract

How do households respond to overseas members’ economic shocks? Overseas Filipinos in dozens of countries experienced sudden, heterogeneous changes in exchange rates during the 1997 Asian financial crisis. Appreciation of a migrant's currency against the Philippine peso leads to increases in household remittances from overseas. The estimated elasticity of Philippine-peso remittances with respect to the exchange rate is 0.60. Positive migrant shocks lead to enhanced human capital accumulation and entrepreneurship in origin households. Child schooling and educational expenditure rise, while child labour falls. Households also work more hours in self-employment, and become more likely to start relatively capital-intensive household enterprises.

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