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Philippines: Treatment of Remittances in NTA
Rachel H. RacelisJ.M. Ian S. Salas
SKKU, Seoul, Korea
5 Nov 2007
Introduction
• NTA aggregate control for labor income:YL = (2/3)*household operating surplus
+ compensation of employees
But,
Compensation = compensation from residents
+ compensation from ROW
- compensation to ROW
• Age profile of compensation from/to ROW may be different from those of residents.
YL components, 1980-2004
0
200
400
600
800
1,000
1,200
1,400
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
20042/3 of householdoperating surplus
Compensation,residents
Net compensationfrom ROW (overseasworkers)
Billion pesos
Share of YL components, 1980-2004
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
20042/3 of householdoperating surplus
Compensation,residents
Net compensationfrom ROW (overseasworkers)
% share of YL
Net compensation from/to ROW
• We try to construct age profiles for net compensation from ROW, but remember that this has inflow and outflow components.
• Since 1997, however, Philippine NIA indicates zero compensation to the ROW.
• If compensation to ROW is significant, how do we construct age profiles for it?
Methodology assumptions
• While NIA has compensation of non-resident employees (overseas worker), what we can get from survey at this time is compensation net of consumption, assuming that the overseas worker:– did not receive transfers (public and private),– did not acquire nor sold assets,– did not borrow or dis-save, and – sent remittances to only one household at home.
• The constructed age profile would be valid if the proportion of consumption to income is the same for all overseas workers.
Available surveys
• Labor Force Survey (LFS), quarterly– Jan, Apr, Jul, Oct; past-week activity– Individual-level
• Annual Poverty Indicators Survey (APIS), every Oct of non-FIES year (triennial)– rider to Oct round of LFS, 6-month coverage– Household- and individual-level
• Survery of Overseas Filipinos (SOF), annual– rider to Oct round of LFS, 6-month coverage– Individual-level; respondent is reporting household
member
Survey details
• APIS excludes overseas Filipinos in its household roster.
• SOF coverage:– overseas Filipinos who went abroad within the past
five years (if >5 years, considered “immigrant”)– asks if overseas Filipino worked abroad– asks the reason for leaving of overseas Filipino and
date of return or expected return– n:1 but not 1:n relationship between overseas
Filipinos attached to households
Some notes on 1999 estimation
• 97% of contract workers left five times or less during the previous five years.– Indicates that most contract workers may have yearly
renewable contracts.
• APIS: 37,454 households; 188,671 individuals• SOF: 1,897 households; 2,174 individuals
• In the following, suffixes _h and _m refer to household-level or individual-level data, respectively.
Data items used: APIS_h
• giftin_abroad_h: “cash receipts, gifts, support, relief and other forms from abroad for past six months, in cash”– may include remittances received from
overseas Filipinos which are not attached to the household (immigrant relatives, friends, etc.)
• No usable item in APIS_m
Data items used: SOF_m
• “reason for leaving the country”– Encoded answers:1. Contract worker2. Work with Phil. Consulate/Embassy abroad3. Worker other than contractual4. Tourist5. Student6. Immigrant7. Official missions8. Others– Different treatment relative to survey definition of
overseas worker (arrows + employed).
Reintegration of overseas Filipinos
• Merge household-file and member-file of APIS, then merge this with SOF_m.
• Use individual weights from both surveys (each calibrated to correspond to census numbers).– Weights of members of household may be
different from overseas Filipino/s attached to it (true for 1999 but not for 2002).
Overseas worker definition
• Overseas Filipino must satisfy both of the following for remittance to be considered as net compensation from ROW:1.be away from his/her household temporarily (to
establish continuing ties as member of the household)
2.be employed (for remittance to be considered as labor income)
• Otherwise, remittance will be classified as inter-household transfer from ROW.
• remittance_h = comp_ROW_h + inter_ROW_h
Adjustments
• Ideally, remittance_h (SOF) == giftin_abroad_h (APIS)
• If >, scale remittance_h to giftin_abroad_h and apply to comp_ROW_m and inter_ROW_m accordingly.
• If <, residual is treated as additional inter_ROW_h.
• Is residual attributable to households receiving remittances from “immigrant” overseas Filipinos (not covered by the SOF survey), or is it due to reporting error?
Remaining issues
• Aggregate control to use for inter-household transfers from ROW (in practice, does net compensation from ROW in NIA exclude remittances unrelated to labor income?)
• Survey representativeness: Only 1,897 households have overseas Filipinos, as defined in the survey (some of which were not employed abroad), while 4,682 households receive cash gifts from abroad, so that inter-HH transfers much bigger than labor income of overseas workers.
Some notes
• Overseas household member sometimes designated as household head, so that resident household head may only be a “substitute” head– we still used “substitute” as head in those cases
• Intra-household inflows of overseas workers are zero but outflows are positive as they directly contribute to disposable income (since labor income is already net of consumption).
Age distribution of overseas and locally employed workers, 1999
Figure 5.Age Distribution of OFW and Locally Employed Workers: Philippines, 1999
0.0
5.0
10.0
15.0
20.0
25.0
1519 2024 2529 3034 3539 4044 4549 5054 5559 6064 6599
Year
Perc
en
t
OFW LocalSelfEmp LocalWageEarner
Normalized age profile of per worker compensation, 1999
Figure 6.Standardized Age Profile of Per Worker Local Labor Earning and
OFW Remittance: Philippines, 1999 (Reference Group=35 to 39)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1524 2529 3034 3539 4044 4549 5054 5599
Age Group
Ra
tio
of
Ag
e G
rou
p M
ea
n P
er
Wo
rke
r V
alu
e t
o R
efe
ren
ce
Gro
up
Me
an
Va
lue
OFW remittance Local self-emp Local wages
Per capita consumption and labor income with and without net compensation from ROW, 1999
Figure 9.Per Capita Consumption, Labor Income (With and Without OFW remittance), and Lifecycle Deficit (With
and Without OFW Remittance): Philippines, 1999
-60000
-40000
-20000
0
20000
40000
60000
80000
100000
0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+
Year
Peso
s
Consumption LaborY-w/OFW LaborY-w/oOFW Deficitw/OFW Deficitw/oOFW