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Split Decisions: Family finance when a policy discontinuity allocates overseas work

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  • Michael Clemens

    (Center for Global Development)

  • Erwin Tiongson

    (World Bank, AIM, and IZA)

Abstract

Labor markets are increasingly global. Overseas work can enrich households but also split them geographically, with ambiguous net effects on decisions about work, investment, and education. These net effects, and their mechanisms, are poorly understood. We study a policy discontinuity in the Philippines that resulted in quasi-random assignment of temporary, partial-household migration to high-wage jobs in Korea. This allows unusually reliable measurement of the reduced-form effect of these overseas jobs on migrant households. A purpose-built survey allows nonexperimental tests of different theoretical mechanisms for the reduced-form effect. We also explore how reliably the reduced-form effect could be measured with standard observational estimators. We find large effects on spending, borrowing, and human capital investment, but no effects on saving or entrepreneurship. Remittances appear to overwhelm household splitting as a causal mechanism.

Suggested Citation

  • Michael Clemens & Erwin Tiongson, 2012. "Split Decisions: Family finance when a policy discontinuity allocates overseas work," RF Berlin - CReAM Discussion Paper Series 1234, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
  • Handle: RePEc:crm:wpaper:1234
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    1. Ha, Wei & Yi, Junjian & Zhang, Junsen, 2016. "Brain drain, brain gain, and economic growth in China," China Economic Review, Elsevier, vol. 38(C), pages 322-337.
    2. John Gibson & David McKenzie & Halahingano Rohorua, 2014. "Development Impacts of Seasonal and Temporary Migration: A Review of Evidence from the Pacific and Southeast Asia," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(1), pages 18-32, January.
    3. Seshan, Ganesh & Yang, Dean, 2014. "Motivating migrants: A field experiment on financial decision-making in transnational households," Journal of Development Economics, Elsevier, vol. 108(C), pages 119-127.
    4. Michael Clemens and David McKenzie, 2014. "Why Don't Remittances Appear to Affect Growth? - Working Paper 366," Working Papers 366, Center for Global Development.
    5. Cortes, Patricia, 2015. "The Feminization of International Migration and its Effects on the Children Left Behind: Evidence from the Philippines," World Development, Elsevier, vol. 65(C), pages 62-78.
    6. Zhang, Hongliang & Behrman, Jere R. & Fan, C. Simon & Wei, Xiangdong & Zhang, Junsen, 2014. "Does parental absence reduce cognitive achievements? Evidence from rural China," Journal of Development Economics, Elsevier, vol. 111(C), pages 181-195.
    7. Michael A. Clemens & David McKenzie, 2018. "Why Don't Remittances Appear to Affect Growth?," Economic Journal, Royal Economic Society, vol. 128(612), pages 179-209, July.
    8. Michael Clemens and Timothy N. Ogden, 2014. "Migration as a Strategy for Household Finance: A Research Agenda on Remittances, Payments, and Development- Working Paper 354," Working Papers 354, Center for Global Development.

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    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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