International Remittances and Family Expenditure Patterns: the Philippines` Case

This paper examines the influence of overseas remittances to patterns of family expenditures in the Philippines using a matched dataset of the Family Income and Expenditure Survey (FIES) and the Labor Force Survey (LFS). The objective is to study whether or not remittances influence budget allocation of families receiving these income transfers. Specifically, it is interesting to check if families with remittances tend to allocate more on say education, healthcare, and housing thereby increasing the development impact of remittances or if they tend to budget more conspicuously on vices and consumer items and hence may forego their chance to maximize gains from remittances. This is becoming an important question amidst many issues of labor migration as the country continues to send hundreds of thousands of its labor abroad. This paper estimated a system of demand equations. The dataset has been adjusted to reflect a more accurate definition of remittances from abroad by excluding the investment dividends and pension components in the FIES remittance data as recommended in previous studies. Likewise, the paper attempts to address the endogeneity issue in studying remittance effects and the presence of zero values in expenditure data.