Introduction Statement of the Problem

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Do remittances affect the consumption pattern of the Filipino households?

Objectives

The objective of this paper is to formulate structural models to illustrate the change in consumption pattern of the Filipino households. In this study, our aim is to use an advanced econometric approach to find out if there is indeed such change in the consumption pattern of the household receiving remittances as compared to those who only get their income from domestic sources.

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Review of Related Literature

There are several studies regarding the consumption patterns of household. One of which is the study made by Taylor and Mora (2006), they studied about the effect of migration in reshaping the expenditure of rural households in Mexico. The conclusion that they made is that remittances has positive effects on total expenditures and investment. They also found out that as the remittances of rural household increases, the proportion of the income on consumption decreases (Taylor & Mora, 2006). Another one is the study of Rasyad A. Parinduri & Shandre M. Thangavelu (2008), wherein they used the Indonesia Family Life Survey data to observe the effect of remittances to the consumption patterns of the Indonesian households. In their study, they used the matching and difference-in-difference matching estimators to observe the relationship. They found out that remittances do not improve the living standard of the households, nor do remittances have an effect on economic development. They used the education and medical expenditure as indicators of economic development. The major findings that they have are that most of the Indonesian households used the remittances in terms of investing them into luxury goods such as house and jewelries (Parinduri & Thangavelu, 2008). Using the same study, we intend to observe the consumption pattern of the households, based not only on the remittances but also to other sources of income. In addition to that, instead of looking at economic development, we intend to look at the consumption goods that households normally consume, and see if there are indeed changes in the consumption patterns of the selected households.

Theoretical Framework

Engel’s Law

Methodology and Data

In the methodology and data part, our main concern is to find ways to observe the consumption patterns of the Filipino households here in this country. In order to do that, we tried to find a dataset that will explain such relationship. Based from the available datasets here in the country, we would say that the Family Income and Expenditure Survey or the FIES best suits our study. The dataset enlists all the possible consumption goods that were being consumed by the households during a specific year. In addition to that, we can also determine the source of income of the different households that was made available in the dataset.

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