These positive outcomes have encouraged the government to push further its labour export policy to the extent, for instance, of declaring that the country should develop "super-maids" for employment in advanced countries.

Last year, the total amount of overseas Filipino remittances (OFW) was officially recorded at US$12.8 billion (Bt445 billion), just above 10 per cent of the GDP. The Philippines is now the world's third highest remittance-recipient country after India and Mexico, and the highest when remittances are measured as ratios to population, GDP and exports.

What are the pros and cons of international migration from the standpoint of the home country, as can be gleaned from international literature and an analysis of Philippine data?

Because international migrants typically are among the better-educated and experienced workers in the home country, their departure often results in a disruption of the economic activity. Labour market outcomes depend on the composition of emigration and the nature of labour markets in terms of flexibility, segmentation and rates of un- and under-employment.

Another important effect of migration is on the quality of goods and services, reflecting the quality of replacement workers. A deterioration in quality would not be unusual. Such is apparent, for instance, in the quality of education and health services in the Philippines as a consequence of the departure of skilled or professional workers (teachers and health workers). However, the decline in service quality could also be partly due to diminished real budgets for public services.

Some experts claim that while migrants are typically well educated, migration does not take away a very large share of a country's best. Others, however, argue that migration leads to a significant loss of highly educated persons. Nevertheless, the brain drain is probably not an unmitigated bane as there are compensating benefits, such as remittances and other beneficial links that the emigrants maintain with the home country, plus the return migration.

The economic consequences of remittances can be considered at different levels. At the household level, to which a substantial portion of migrant workers' earnings is remitted. The remittances serve to enhance family incomes. Whether they represent a net increase is debatable, given that family members may reduce their work effort. On balance, though, it seems clear that recipient families are better-off with, rather than without, the remittances.

At the community level, inequality and poverty are mitigated, although income distribution worsens if it's the richer families that are the main recipients. Nonetheless, the creation of jobs and trading opportunities often results from investment and greater demand for goods and services, with the beneficiaries in turn generating further spending.

At the macroeconomic level, remittances have become a major source of foreign exchange, especially for countries plagued with fiscal deficits, external debts, persistent trade imbalances and scant foreign-direct investment. Foreign exchange inflows, however, may exert upward pressure on prices, requiring skilful monetary management. Moreover, these inflows may spur a real appreciation of the exchange rate, thereby constraining the development of export-oriented and import-competing industries. Further, the remittance windfall may dissipate the urgency for policy reform and better governance, while lulling the citizenry into complacency.

An analysis of Philippine data shows that remittances contribute significantly to poverty alleviation, as reflected in higher family spending per capita among the lowest 40 per cent of households. On the other hand, it controls the effects of other variables including physical infrastructure and human capital in the regions. This beneficial effect rises consistently up to the fourth quintile, then peters out toward the fifth quintile, which is not surprising given that the richest 20 percent of families, most likely, do not have members working abroad (overseas Filipino workers) or do not need remittances.

In sum, migration and remittances appear to benefit households, communities and the macroeconomy. They alleviate poverty, contribute to community development and finance fiscal and trade deficits and debt.

But there are considerable costs. Migration exacts from OFWs and their families no mean sacrifices and other social costs. It is also subject to geopolitical vicissitudes and global market swings.

Moreover, migration arguably causes brain drain that compromises the country's human capital requirements for its long-term development.

Meanwhile, the remittance bonanza makes it convenient for the government to skirt the difficult task of policy reforms that are needed to improve the performance of the economy.

Should the government indefinitely carry on with its labour export policy and keep the economy dependent on remittances? The country would probably be better served if the government instead focuses on policy reforms to put the economy on a rapid and sustained growth path, as did South Korea and Thailand during their labour export phases in the 1970s and 1980s. A robust domestic economy would make working abroad an option - not a necessity - for Filipinos.

Ernesto M Pernia

The Philippine Inquirer

Manila

Ernesto M Pernia is a professor of economics at the University of the Philippines. This article is based on his UP School of Economics discussion paper(July 2006).

The Philippine Inquirer is a member of Asia News Network.