The impact of remittances on human resource development decisions, youth employment decisions, and entrepreneurship in the Philippines using CBMS Data Christopher James R. Cabuay Angelo King Institute for Economic and Business Studies De La Salle University I. Introduction a. Background For the past few decades, international migration has been an avenue for Filipinos to seek employment abroad. The stock of Filipino migrants has reached 10,489,628 in 2012 (Commission of Filipinos Overseas [CFO], 2014). Overseas Filipino Workers (OFWs) have been going to Saudi Arabia, United Arab Emirates, Singapore, Hong Kong, and Qatar for employment (Philippine Overseas Employment Administration [POEA], 2014). Migration is often coupled with the sending of remittances to one’s household in the country of origin. These remittances have become a major avenue for many households to maximize income and smoothen consumption spending over time. OFW remittances has been a significant driver of the Philippine economy especially since it fuels the property market with a strong demand from medium-low-income wage earners among families with OFWs (Villegas, 2014). Remittances have grown over the past decades and have reached 18.76 USD billion in 2010 (BangkoSentralngPilipinas [BSP], 2014) and growing further to 22.97 USD billion in 2013. The largest remittances come from USA (about 9.9 USD billion), followed by Saudi Arabia (approximately 2.1 USD billion), United Kingdom (1.32 USD billion) United Arab Emirates (1.26 USD billion), Singapore, Japan, and Canada (BSP, 2014). This indicates the dependency of the Philippine economy to the remittances from overseas workers. Despite the prevalence of the phenomenon, a significant question still remains: how are remittances being used by families? Tabuga (2007) finds that remittances generally decrease the household’s budget allocated for food, but increases the budget allocated for education, medical care, housing and repairs, consumer goods, leisure, gifts, and durables. Many studies (Orbeta, 2008; Tullao, Cortez, and See, 2007; Tabuga, 2007) have pointed to remittances having an improving effect on the human capital accumulation of households, namely education. However, a debate still stands on whether or not remittances improve a household’s labor force participation or causes dependency among recipients. In the Philippine setting, studies (Tullao, Cortez, and See, 2007; Rodriguez and Tiongson, 2001) have found the labor force participation and employment is lower in remittance-receiving households, but some studies (Ducanes and Abella, 2007; Cabegin, 2006) find that remittances may not cause dependency, but simply enhances avenues for self-employment. As for the Philippine youth, the segment of the population aged 15-24, unemployment has been fluctuating between 16% to 16.7% from 2011 to 2013 (World Bank, 2015). In the country, a youth of this age has either the option to enter tertiary or post-secondary education, or to enter the workforce. Using the data gathered by the Community-Based Monitoring System (CBMS), particularly with the social protection for the informal sector (SPIS) and youth employment and entrepreneurship (YEE) information, this study aims to characterize the unemployment among youths, while empirically tracing the impact of remittances on whether they are more likely to pursue tertiary or post-secondary education, enter the labor force, or possibly causing dependency at the individual level. Furthermore, the study aims to empirically trace the impact of remittances on the employment decision of youths, that is compare the impact on their propensity to enter self-employment, employment with institutions, and aid in family-run establishments. Lastly, the study aims to empirically trace the impact of remittances on the propensity of the household and youths to engage in entrepreneurship. The role of remittances in households is to pay for needs such as food, clothing, utilities, rent and the like. After paying for these necessities, there is disposable income for the households to use. Households can spend on renovations on the house, electronics and other luxuries. A point of interest in this study is how remittances are spent on education and entrepreneurial endeavours. Households investing in these areas may have an effect on the youth employment decisions. b. Objectives of the Study Using CBMS data for the Philippines, trace the impact of remittances on the human resource development decisions of youths using a multinomial logistic regression Using CBMS data for the Philippines, trace the impact of remittances on the employment decision of youths using multinomial logistic regression. Using CBMS data for the Philippines, trace the impact of remittances on the propensity of households and youths to engage in entrepreneurship using propensity score matching and instrumental variable regressions. II. Migration and Remittances (M&R), Human Resource Development, Youth Employment, and Entrepreneurship Migration and remittances have a variation of impacts on the human capital accumulation of a country. In the case of school participation, remittances can be beneficial (Buoiyour&Miftah, 2015). But, the absence of a parent or parents can decrease school participation (PPP, 2014). There are also other factors that can affect school participation rate like the household’s perception on the return of the investment in education, the opportunity cost of a child foregoing work and the expected economic gain from a youth migration. Acosta (2007) stated, “the direction of the relationship between remittances and child education would depend on idiosyncratic characteristics of each country”. Another issue that is highlighted in the literature of M&R and human capital formation is brain gain/ brain drain. The migration of workers has consequences on the labor market. There will usually be an emigration of low skilled and professional workers. The loss of professional workers is equivalent to a brain drain in the home country. Kugler (2008) found the developing countries are more prone to brain drain or human capital losses. However, the prospect of migration can help increase schooling rates that can lead to brain gain. This has been suggested by Stark and Dorn (2013) and Stark, Helmenstein, and Prskawetz (1998). Stark et al (1998) suggest that although migrants take along more human capital than if there was no prospect of migration, workers that stay will also have more human capital because of the prospect and aspiration to migrate. This was extended by Stark and Dorn (2013) who show that in the presence of savings, with a low degree of relative risk aversion, a worker who saves when there is a prospect of migration will acquire more human capital than without the prospect of migration. The link between remittances and human resource development has already been the discussion of many studies. Orbeta (2008) provides a review of Philippine-based remittance literature. Tullao, Cortez and See (2007) and Tabuga (2007) find that remittance-receiving households are highly elastic to housing, education, health care, durables, transportation and communications expenditures. This implies that remittances increase the demand for better education, and hence, investment in human capital (Tullao and Cabuay, 2012). To receive remittances implies that a household has sent a member to work or has relatives in foreign countries. The brain drain and the complementary brain gain may facilitate human capital accumulation because members of remittance-receiving tend to have an inclination to increase their labor productivity in the home country in hopes of overseas migration in the future (Tullao& Cabuay, 2012; Ang, 2006). However, there are debates to this view that state that households use remittances to consume rather than invest in entrepreneurial capacity and human capital (Opiniano, 2007; Burgos & De Vera, 2005). This largely depends on what motivates the migrant to send remittances (Tullao& Cabuay, 2012). Wang (2012) suggests that given the case of parental migration, schooling may be disrupted due to the absence of the parents, but there is also a possibility that it may be enhanced when remittances are sent, or that children exhibit the aspiration to migrate. More recently, Theoharides (2014) finds that migration can increase secondary school enrolment in the Philippines. On the other hand, there is much debate about the link between remittances and employment. Following the line of thought of the previous discussion on how remittances may help in increasing human capital, remittances may therefore encourage household members to enter the labor force. Labor migration (brain drain) induces the remaining household members to increase their labor productivity, thereby making themselves more employable (brain gain) although this may come with the hope of emigration in the future as well (Tullao& Cabuay, 2012; Ang, 2006). However, Tullao, Cortez and See (2007) find that labor participation and employment rates are lower in remittance-receiving households. Rodriguez and Tiongson (2001) find that the presence of OFWs in the household decreases labor participation due to increased demand for leisure. Ducanes and Abella (2007) have found otherwise, particularly in a case where there are OFWs present in the household. Cabegin (2006) finds that the labor supply decision of households vary between men and women depending on the presence of school-age children. In general, remittances decrease labor participation