Remittances and Poverty - a Case Study of the Philippines

Abstract: Remittances are the second largest inflow of capital to the Philippines after Foreign Direct Investment. The Philippines are a lower middle income country with about 33 percent of its 76.5 million population living in poverty. Earlier research on remittances and poverty agrees on the positive effects of remittances on poverty. This thesis’ objective is to show how remittances are distributed among the regions and how remittances relate to poverty in the Philippines. Questions of particular interest are how and if the absolute poor benefit from remittances and what effect remittances have on the income distribution. This thesis is based on a review of the literature on remittances and poverty. It further compares statistics on household income and poverty within the Philippines. This thesis finds that the share of people living in poverty decreased between 1985 and 2000, while the headcount of people in poverty increased. Most of the poor people live in rural areas and most of the decrease in poverty has been in urban areas. Remittances are higher for regions with high income, low share of people living in poverty and high stage of urbanization. The income distribution in the Philippines is highly unequal and remittances are the most unequally distributed income source. The income distribution is more equal for regions with higher remittances per capita.