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 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. Four-fifths of long-run income gains are actually from domestic (rather than international migrant) income. A simple structural model yields insights on mechanisms and magnitudes, in particular that one-fifth of long-run income gains are due to increased educational investments in origin areas. Increased income from international labor migration not only benefits migrants themselves, but also fosters long-run economic development in migrant-origin areas.
We thank HeeSung Kim and Theo Kulczycki for excellent research assistance. We appreciate feedback from Toman Barsbai, Sam Bazzi, Gustavo Bobonis, Loren Brandt, Emily Breza, Lorenzo Casaburi, Dasha Celik, Levent Celik, Christian Dustmann, Ryan Edwards, Xavi Giné, Joseph Gomes, Jess Goldberg, André Gröger, Andrea Matranga, David McKenzie, Pablo Ottonello, Dina Pomerantz, Imran Rasul, Yasu Sawada, Alex Scacco, Matti Sarvimäki, Mahesh Shrestha, Sebastian Sotelo, Andreas Steinmayr, Marko Terviö, Lore Vandewalle, David Yanagizawa-Drott, Xiaodong Zhu, and seminar participants at Universitat Autonoma de Barcelona, U. Munich, U. Navarra, U. Zurich, Higher School of Economics, New Economic School, Helsinki Center of Economic Research (HECER), Development Network Berlin (DENeB), Asian Development Bank, U. Toronto, Australian National University, University College London, Ateneo de Manila, U. Paris 1 Panthéon-Sorbonne, the U.K. Foreign, Commonwealth, & Development Office (FCDO), the 2015 International Conference on Migration and Development (World Bank), the 2017 Centro Studi Luca d‘Agliano/Colegio Carlo Alberto/FIERI Migration Conference, the 2018 Geneva Workshop on Financial Inclusion in Developing Countries (Graduate Institute Geneva), the 2018 Barcelona GSE Migration Summer Forum, NEUDC, the 2018 IZA Migration Meeting, the 2018 International Conference on Migration and Development (U. Carlos III Madrid), and the 2021 Asia Impact Evaluation Conference (HKUST/ADB/KDI). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.