Of milk and honey : returns to education and migration of filipinos

Abstract

Previous studies show high returns to primary education and decreasing returns to education in the Philippines. The first part of this thesis shows that standard estimates of returns to education capture the effects of ability and education quality. It finds that accounting for education quality reduces returns to education and that returns to education quality amount to three-fourths the returns to quantity of education. Moreover, accounting for ability using sibling fixed-effects estimation reduces returns to schooling by 70 percent, yields no significant returns to basic education, and yields increasing returns to higher education. The study also finds unequal education returns across Philippine regions associated with uneven economic development, which may be driving internal and international migration of Filipinos. The second part of this thesis aims to estimate the impacts of proximate and underlying factors on both permanent and temporary migration from the Philippines. Contrary to theory, it finds that migration rises with increasing domestic wages, providing additional insight into the empirical literature on the 'migration hump'. While permanent and temporary migration respond the same way to most 'push and pull' factors, findings suggest that permanent migrants are positively selected from the Philippine labor force while temporary migrants are negatively selected in the destination labor force. Although temporary migrants earn lower wages than natives in the destination countries, they respond positively to destination wages. The third part of this thesis aims to estimate the returns to migration and education for overseas Filipino workers. It finds that earnings of overseas Filipino workers in most key destinations are higher than those of domestic workers, but their returns to schooling are not significantly different from, or are even lower than, those of domestic workers. These findings confirm the negative selection of temporary migrants. Apart from purchasing power parity gains to either earnings or returns to schooling, there are also monetary gains in the conversion of foreign earnings to the local currency through the US dollar (as in the case of remittances).