The Impact of International Labor Migration and OFW Remittances on Poverty in the Philippines

The implications of labor migration and remittances on poverty are becoming a global issue. The Philippines is considered as one of the largest labor-sending countries in the world. There are numerous studies on remittances and migration and how they contribute to poverty reduction. However, the studies particularly done for the Philippines are quite scarce. There are still certain aspects that have not yet been explored. In this paper, we aim to enhance the current and previous studies by examining the impact of migration on poverty using a different theoretical and empirical framework. We also intend to analyze the sole effect of migration on poverty in the Philippines and to utilize three measures of poverty to determine the effects of migration and remittances on the different levels of poverty. Finally, in this study, we only consider the role of Overseas Filipino Workers (OFW). Thus, we use the data on labor migration and remittances on OFWs alone. This paper investigates the impact of labor migration and overseas workers' remittances on poverty reduction in the Philippines using a panel data on the 16 regions in the years 1997, 2000 and 2003. The study identifies and quantifies the individual poverty alleviating effects of the level of labor migration and volume of remittances on the three Foster-Greer-Thorbecke poverty indices –the incidence, depth and severity of poverty in the Philippines. The findings suggest that labor migration and remittance flows exert a negative and significant impact on all three measures of poverty. A 10% increase in per capita remittance and number of labor migrants leads to an approximately 0.4% and 0.2% reduction, respectively, in the proportion of families living below the poverty line.