ANN ARBOR—Philippine households used money from their migrant relatives to keep children in school longer and to start their own businesses, a new study showed.

The University of Michigan findings contradict other studies about international migration, which showed families used remittances for consumption needs, not investment opportunities.

“The findings shed light on how developed countries’ policies affecting migrant workers can affect households in poor countries,” said U-M researcher Dean Yang, the study’s author. The research appears in the April issue of the Economic Journal.

Yang, an assistant professor at the Gerald R. Ford School of Public Policy and Department of Economics, analyzed Asia’s financial crisis in the late 1990s and identified its effect on investment outcomes for Philippine households.

At that time, the U.S. dollar and currencies in the Middle East rose 50 percent in value against the Philippine peso. This led Philippine households with family members earning in these currencies to receive larger amounts of remittances from their overseas relatives, which in turn allowed the families to have additional money for educational and business purposes.

Yang tracked outcomes affecting children and their schooling and employment. Children stayed in school longer and didn’t need to have jobs to supplement the household income, he said.

Additional money from migrant workers also meant their families could start their own businesses, such as operating a taxi or running a small-scale manufacturing company.

Yang said the research shows that migrants were less likely to return to the Philippines when they experienced positive exchange rate changes overseas.

Policies in developed countries that expand employment opportunities for overseas workers can stimulate human capital investment and entrepreneurship in developing countries, he said. For example, policies that allow undocumented workers to obtain legal working papers, such as those debated in the United States, should expand the earning opportunities of U.S. migrants, Yang said.

On the other hand, increasing enforcement against illegal immigrants or eliminating temporary work permissions for overseas migrants can reduce migrant earning opportunities. This discourages household investments, he said.

Related Links:

• Dean Yang
• Gerald R. Ford School of Public Policy
• Economic Journal