Workers’ Remittances and its Impact on Rural Development in the Philippines

Abstract

This paper considers the present issues surrounding the role of workers remittances and its contribution/effect on economic growth and development. In particular, this paper examines how such remittances have been able to spur development and growth in the countryside. As a case study, the paper focuses on the regions of the Philippines. The Philippines is one of the countries in the world with a long history of sending workers abroad. In 2007, the Philippines received approximately US$15Bn of remittances, more than 12% of its GDP. It ranks as the 3rd largest recipient of remittances in the world, after India and Mexico. Along this line, the paper looks into the following areas: (a) linkages between remittances and microfinance; (b) tracing the contribution of remittances to countryside development; and (c) the relationship between worker remittances and structural reform policies. We hypothesize that workers' remittances have not been properly utilized into productive and investment uses in the Philippines. There are strong anecdotal evidences that show that most of these remittances are being used to fund conspicuous consumption. Hence, we would like to find ways to harness these resources to funding development needs of the country. We find that remittances contribute to national growth; however, it also makes worse income inequalities among regions.