This paper exploits a unique natural experiment that helps identify the causal impact of remittances on poverty in migrants’ origin households and in remittance-receiving areas. The authors take advantage of exogenous shocks to the remittance receipts of Philippine households. Because Filipino migrants work in a variety of foreign countries, origin households experienced sudden changes in exchange rates due to the 1997 Asian financial crisis. The paper finds that the appreciation of a migrant’s currency against the Philippine peso leads to increases in the origin household remittance receipts, and reductions in poverty in migrants’ origin households. The authors also find evidence of spillovers to households without migrant members, focusing on cross-regional variation in the mean exchange rate shock experienced by the region’s migrants. In regions with more favorable mean exchange rate shocks, aggregate poverty rates decline even in households without migrant members. However, they do not find strong evidence of effects on region-level inequality.

Publication Details

Remittances and Poverty in Migrants’ Home Areas: Evidence from the Philippines
Yang, Dean C
World Bank
Publish Date
Yang, Dean C, Remittances and Poverty in Migrants' Home Areas: Evidence from the Philippines (World Bank, 2006).