Remittances and Poverty in Migrants’ Home Areas: Evidence from the Philippines

Abstract

In many developing countries, remittance receipts from overseas are important supplements to household income. How do these remittance flows affect poverty and inequality in migrants’ home areas? To answer this question, we take advantage of exogenous shocks to the remittance receipts of Philippine households. Filipino migrants work in a variety of foreign countries, and experienced sudden 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 remittance receipts, and reductions in poverty in migrants’ origin households. We 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, we find no strong evidence of effects on region-level inequality.