Working Paper: NBER ID: w29862
Authors: Gaurav Khanna; Emir Murathanoglu; Caroline B. Theoharides; Dean Yang
Abstract: How does income from international migrant labor affect the long-run development of migrant-origin areas? We leverage the 1997 Asian Financial Crisis to identify exogenous and persistent changes in international migrant income across regions of the Philippines, derived from spatial variation in exposure to exchange rate shocks. The initial shock to migrant income is magnified in the long run, leading to substantial increases in income in the domestic economy in migrant-origin areas; increases in population education; better-educated migrants; and increased migration in high-skilled jobs. 77.3% of long-run income gains are actually from domestic (rather than international migrant) income. A simple model yields insights on mechanisms and magnitudes, in particular that 23.2% of long-run income gains are due to increased educational investments in origin areas. Improved income prospects from international labor migration not only benefit migrants themselves, but also foster long-run economic development in migrant-origin areas.
Keywords: Migrant Income; Economic Development; Asian Financial Crisis; Philippines
JEL Codes: F22; J24; O15; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial shock to migrant income (F24) | long-term income gains in the domestic economy (E25) |
| migrant income shock (F24) | share of population with a college education (I24) |
| share of population with a college education (I24) | long-run income gains (E25) |
| migrant income shock (F24) | domestic income growth (O49) |