The saving behavior and consumption pattern of remittance-receiving households in the Philippines
Date
2005-04
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Abstract
The contribution of remittances from abroad to national income is becoming more significant, with its increasing share in gross national product and in exports. This study identifies the impact on household saving of remittances, along with other demographic factors (urbanity, dependency ratio, educational attainment of household head, region). This paper likewise investigates the consumption patterns of remittance-receiving households (RRHs) with respect to consumer goods, expenditure for human capital, and productive investment.
Using Ordinary Least Square method (OLS), RRHs are seen to have a positive average propensity to save even if they tend to consume relatively more than save relative to non- RRHs. RRHs are also found to spend most on consumer goods, followed by expenditure for human capital and productive investment. Income elasticities for these consumption categories are similarly estimated. Human capital expenditure is shown to be the most responsive to changes in both non-remittance income and remittances. The life-cycle and permanent income hypothesis (LC-PIH) holds for saving; that is, the marginal propensity to save out of transitory income is higher than that out of permanent income. On the other hand, the LC-PIH holds for expenditure for productive investment; that is, marginal propensity to consume out of permanent income is higher than that out of transitory income. Urbanity and high educational attainment of the household head have positive effects on saving while dependency ratio has a negative effect. Saving and consumption behavior also differ across regions.
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Keywords
Saving behavior, Consumption pattern, Remittances, Household expenditure, Household savings, Spending habits