Exogenous Remittance Expansion and Household Human Capital Accumulation
Determining whether international remittance inflows lead to sustainable long-term economic development or merely subsidize immediate household consumption requires identifying causal shocks to migrant earnings.
Picture this
When currency values shift abroad, an overseas worker suddenly gets a pay raise in terms of their home country's currency without changing their job. Families receiving this unexpected extra cash use it to keep children in school longer, start small businesses, and permanently lift themselves out of poverty.
What the evidence says
Positive exogenous remittance shocks significantly increase household probability of escaping poverty status, elevate child school enrollment rates, and increase capital investment in household entrepreneurial enterprises.
- Who
- Philippine transnational households receiving migrant remittances during foreign exchange rate fluctuations.
- How
- Panel econometrics and instrumental variable estimation leveraging exogenous exchange rate shocks across migrant destination countries during the 1997 Asian Financial Crisis.
What to do
Facilitate low-cost international transfer channels to maximize the developmental and human-capital impacts of migrant income gains in origin countries.
From the source
"Households in the Philippines experiencing exogenous increases in remittances become more likely to leave poverty status, to send their children to school, and to invest in entrepreneurial enterprises (Yang & Martinez 2005, Yang 2008a)."
Financial Education and Financial Access for Transnational Households: Field Experimental Evidence from the Philippines