Split Decisions: Household Finance When a Policy Discontinuity Allocates Overseas Work

Michael Clemens and Erwin R. Tiongson
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Erwin R. Tiongson: Georgetown University, IZA, and Asian Institute of Management

The Review of Economics and Statistics, 2017, vol. 99, issue 3, 531-543

Abstract: Temporary overseas work can both raise a family's income and split the household geographically, with theoretically ambiguous net effects on spending, finance, and labor supply decisions. We study a policy discontinuity in the Philippines that quasi-randomly assigned temporary, partial-household migration for high-wage jobs inKorea. This allows quasiexperimental estimates of reduced-form effects of migration. We find that migration causes large changes in households' spending and saving—not only through remittances but also migration-induced shifts in household decision-making power. Migration does not reduce labor supply by nonmigrants. Common nonexperimental estimators would have been subject to substantial selection bias in this setting.

Date: 2017
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