Review of Related Literature on the Topic: Effects of Remittances and Migration on various Economic Units/Sectors As a brief introduction, we define

remittance as the transfer of money earned by a foreign worker that in turn will be sent to his or her home country. On the other hand, migration is the movement of people from one country to another for the purpose of establishing a new or semi-permanent residence. During the 2nd International Conference on Migrant Remittances in London, November 2006, it was said that remittances are the most tangible- and non-controversial link between migration and development. Dilip Ratha, an economist and also the Manager of the Migration and Remittances Unit at the World Bank, mentioned that migration generates substantial welfare gains and reduces poverty and that benefits to countries of origin are mostly through remittances. This review of literature aims to present both the positive and the negative effects migration and remittances on the economy and on economic sector such as households. This review of literature presents the effects of remittances and migration on various economic units or sectors, both the positive effects and the negative ones. Some economic journals suggest that remittances actually contribute economic growth while others insist that remittances hamper economic growth. Up to now, the impact of remittances on economic development is still not well established but after thorough analysis of the literature, it could be deduced that there are still other factors at play that determine if remittances are good for the economy or not. It should also be noted that after determining if remittances reap positive or negative effects on the economy, the focus is shifted to migration and the same question is asked, whether or not the consequences of migration create positive or negative effects to economic development. Remittance practices and outcomes are also rooted in the migration process itself and reect the needs of movers and their sending households. ( Cohen and Sirkeci, 2012) Lastly, the economic sector that this review of literature would focus on is the household which is the basic residential unit in which economic production, consumption and shelter are organized and if in fact there are differing implications if remittances were sent to an urban or a rural household. Remittances contribute to economic growth According to the United Nations Development Program or UNDP, remittances are considered to play an important role in helping developing countries because the money received from theses remittances can be used as additional financial resources and could help in the creation and sustainability of livelihoods. Whenever remittances are received by the foreign workers household or family, it resulted to an increase of that households income and taking this act of receiving of remittances to a larger context, that is to say the recipient countrys foreign exchange reserves also increase. (Serio, 2012) Several studies in the Philippines have proved that such positive effects are the case. In the Philippines, several economics expert admit that remittances indeed contribute to economic growth. According to the World Bank, the Philippines is reputed to be the worlds fourth highest remittance recipient country, next only to India, China and Mexico. (Serio, 2012) It is not surprising to think that Philippines is highly dependent on remittances as evinced by the amount of overseas remittances that continues to increase at staggering rates and Tabuga also stated that remittances have been growing at an average rate of 16 percent annually. Studies made by Serio show that remittances have a positive effect on the Philippine economy in the long run wherein he stated there is 0.018% increase in the economys gross domestic product or GDP when the remittances sent by overseas workers to the Philippines increases by 1%. When remittances are invested in safe and productive ventures such as insurance, education, land, household enterprises and others in the long run, it can be said that remittances are more likely to improve the lives of the migrants families and would later translate into a positive effect on the economy as a whole. (Serio, 2012) Therefore it can be concluded from these phenomenal rates of remittances that remittances actually play a rather important role in the economic development of the Philippines. (Tabuga, 2008) The Philippine government has shown great interest in remittances from abroad and has come up with policies to properly regulate the inflow of money. (Rodriguez, 1996)

Remittances hamper economic growth As much as we all want to believe that remittances always reap positive effects, such were not always the case as other economics experts tried to prove that remittances actually have the capacity to do more damage than good to an economy by posing a threat to its economic growth. The studies made by Serio also presented the adverse effects of remittances wherein recipients of such remittances acquire moral hazard problems such as decrease in labor participation, reduction of labor effort and investment in risky and expensive projects which on closer look may actually hinder economic growth. Some studies also show that remittances create negative effects on the origin country, as remittances have been used mostly for consumption, rather than to increase the productive capacity. Lastly, if in the long run, remittances positively affect a countrys economy in the short run however, remittances negatively affect the economys output due to the fact that an increase in remittances sent to the country is associated with a decline in the economys output. (Serio, 2012) Experts have expressed their recommendations that one cannot really tell accurately whether or not remittances triggers economic growth or not. Keely and Tran (1989) recommended that there is a dire need to re-evaluate and reformulate a framework for analyzing the micro and macro function and effects of remittances for economic performance of labor exporting countries based on empirical analysis. (Keely and Tran, 1989) In addition to these recommendations, Stahl and Arnold admit that there has been the common shortcoming of the empirical studies reviewed above that they have not been formulated in a manner which would allow one to assess the impact of remittances on domestic output, employment and capital formation. (Stahl and Arnold, 1986) Tabuga added that the effect of remittances on the other categories such as education, medical care and housing investments, need further and more careful analysis and must be attended to in future research. (Tabuga, 2008) Finally, remittance practices are said to be not always predictableand they shift over time because long-term and settled migrant have different expenses from those who just moved in. (Cohen and Sirkeci, 2012) It is also important to note that there are always other economic on non-economic factors at play when we talk of economic growth that researchers may have omitted. Migration and its positive effects on the economy Migration has become a big issue in modern days due to the large number of people who are willing to leave their country of origin to set out and find a job and eventually their luck in foreign lands. International migration has reached unprecedented scale, diversity and political, economic, social and demographic significance in Asia over the last decade. (Hugo, 2006) Like remittances, economics expert debate among themselves whether or not migration supports economic growth. Nevertheless, most studies made by these experts show that migrations effects are generally positive. The economic benefit from migration comes in the form of remittances sent to households of the workers country of origin. Firstly, migration is seen to have eased the pressure of unemployment (Rodriguez, 1996) because a person can actually find work someplace else although it comes with the burden of leaving ones country of origin and the zone of comfort it provides. Migration and its negative effects on the economy A classic example of negative effects of migration is of course, brain drain because the impact of the migration of highly skilled people on the economic prospects of origin countries is highly controversial. But what usually happens is that the negative impact of the brain drain might be mitigated by its favorable effect on remittances. (Faini, 2007) Recommendations regarding migration were also given and as Taylor argued in his paper, the true determinants and impacts of migration and remittances on economic development differ across locales because there are other factors in play such as the migrants remittance behavior and by the environmental market, and economic policy contexts in which migration decisions are said to be taken and into which migrant remittances subsequently flow. Taylor also recommended that future researchers of migration and remittances study why international migration appears to be associated with positive development outcomes in some migrant sending areas but not in others. Another important issue raised by

Taylor is that the impacts of migration and remittances should be assessed relative to what migrant sending economies would have looked like without migration and he further presses that such an assessment would require the use of hypotheticals which could blur the quantitative qualities of economic researches. (Taylor, 1999) Lastly, Yang believes that lessons from these studies of migration and remittances should be disseminated to encourage the spread of innovations that are found to have the most positive effects and that coming years should see dramatic expansions of our knowledge on these and related questions. (Yang, 2011) Positive effects on Households The starting point in theorizing the relationship between migration and community and its effects to the latters development is the household itself. Because the household is the basic residential unit in which economic production, consumption and shelter are organized it would follow that migrants come from their own households and it is always their intention to send money to their respective households. (Taylor, Arango, Hugo, Kouaouci, Massey, and Pellegrino, 1996) Large numbers of households depend heavily on remittances (Rodriguez, 1996) because of the fact that many households consider it a way to earn income, it would also follow that there is the idea that remittances positively affect households. In her studies, Tabuga showed that there is evidence that households receiving remittances tend to consume items more. But not only do they spend more, they also invest more on education, housing, medical care and durable goods. This act of investing has a beneficial effect on the economy as it can create an impact on local development. (Tabuga, 2008) Tabuga also found it important in her studies to take into consideration the assessment of the spending behavior of households helps in determining whether or not remittances are spent wisely. If indeed remittances are spent in productive ways, then remittances have greater potential of spurring progress. Lastly, in the case of the Philippines, remittances are seen in a positive light because there are households that receive remittances from abroad but do not necessarily have members who are migrant workers due to close ties and kinship that add to their income. (Tabuga, 2008) Negative effects on Households But then again, there are some negative aspects in how remittances affect households. In his studies of the remittances in the Philippines, Serio found out that on the household level shows that the role of remittances in increasing household consumption and investment and their potential for rebalancing economic growth resulted for remittances to negatively affect the share of consumption in the total expenditure which suggests that remittances do not really contribute toward rebalancing growth by creating domestic demand. (Serio, 2012) Another negative effect rooted from remittances is that households with higher average incomes and education receive larger remittances, suggesting that remittances could unintentionally increase inequality in the Philippines. (Rodriguez, 1996) Researchers admit that their studies on the influence of remittances in households are still imperfect and would still require future improvements. It is expected that households receiving remittances behave like any other households with all other factors being the same. However such is not the case because there are factors outside the realm of economics, namely a behavioral approach could also show that sources and amount of income both play roles in placing them in certain accounts. Households receiving remittances may be fundamentally different from those that do not and to compare the difference to the remittances received may not be reasonable. Tabuga suggested that to deal with this issue, expenditure behavior of households receiving remittances should be compared with that of similar households without migrants. (Tabuga, 2008)

WORKS CITED

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