Why Do Migrants Return to Poor Countries? Evidence from Philippine Migrants’ Responses to Exchange Rate Shocks

Dean Yang

No 513, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: Why would migrant workers in rich countries ever return to poorer countries of origin? In a model of migration and household investment, with borrowing constraints and minimum investment thresholds, return migration occurs for either target-earnings or life-cycle reasons. This paper exploits a unique quasi-experiment to distinguish between these potential explanations for return migration. I examine how the return decisions of Philippine migrants respond to major and unexpected exchange rate shocks (due to the 1997 Asian financial crisis). Overall, the evidence favors the life-cycle explanation: more favorable exchange rate shocks lead to fewer migrant returns. A 10% improvement in the exchange rate reduces the 12-month return rate by 1.4 percentage points. However, there is evidence that some migrants are motivated by target-earnings considerations: for households with intermediate levels of foreign earnings, more favorable exchange rate shocks have the least effect on return migration, but lead to increases in entrepreneurial income, real property purchases, and vehicle ownership. Overall, the findings are at odds with a model with relaxed constraints on borrowing for household investment.

Keywords: international migration; intertemporal labor supply; credit constraints; exchange rate shocks; entrepreneurship; Asian financial crisis (search for similar items in EconPapers)
JEL-codes: D13 F22 J22 O12 O15 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r513.pdf

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Journal Article: Why Do Migrants Return to Poor Countries? Evidence from Philippine Migrants' Responses to Exchange Rate Shocks (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:513

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