Behaviour of Deployed Land-Based OFWs in Asia

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Submitted to the
Department of Economics and Political Science
University of the Philippines Baguio

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In Partial Fulfilment
Of the Course Requirements
In Economics 131

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Submitted by:
May Frances S. Calsiyao
Maggie C. Simeon
March 31, 2006
I. Introduction

This paper attempts to study whether the characteristics of destination

countries in Asia (e.g. Gross Domestic Product (GDP), Population, and
Unemployment Rate) affect the number of deployed land based Overseas Filipino
Workers (OFW) in those countries. This study is limited to countries located in Asia.
Also, other factors affecting the number of OFWs deployed in Asian countries were
not taken into account. This study would test the hypothesis that:

Ho: Number of Land based OFWs = f (Destination countries’ GDP,

Population, Unemployment Rate and Region)

H1: Number of Land based OFWs ≠ f (Destination countries’ GDP,

Population, Unemployment Rate and Region)

The diagram below shows the conceptual framework for the study:

GDP Destination Country

Region Destination Country

Number of
Deployed
Land-based Unemployment Rate
OFWs Destination Country

Population Destination Country

II. Review of Related Literature:

Working abroad and migrating to other countries has become a subject of

many researches because it is a widespread phenomenon that has affected our country
and our economy as well. Several studies have been made about Overseas Filipino
Workers. Some of the studies are cited as follows.

Professor Edita Tan provided a historical perspective on the propensity to

migrate of Filipinos in her discussion paper entitled “Overseas Employment, Savings
Rate and Income Distribution: the Philippine Case”. Prof. Tan mentioned that the low
rate of economic growth, the persistently high unemployment rate of the country, the
expected benefits, the willingness to leave their homes and the ability to find jobs
abroad are some factors on why Filipinos migrate abroad. She also added that the
presence of fellow countrymen in many destinations provides the OFWs with
information about the conditions in strange lands and thus lowering the risk and it’s a
form of social security.

Another discussion paper made by Prof. Edita Tan, entitled as “Filipino

Overseas Employment- an Update” emphasized variables that lead to the migration of
Filipinos abroad. According to her paper, the flexibility of the Philippine labour
market, fairly and long positive experience with employment and emigration,
monetary gains, slack performance of the economy, increasing employment and rising
wage rate abroad and the positive impression created by Filipino to work and migrate
abroad. Furthermore, she says that the monetary benefits based on the destination and
occupations are assumed to be the main factor for migration and employment abroad.

The study conducted by Rodriguez and Horton as cited by Ruby Jean Bulanon
and Lara Faye Mula in their Undergraduate Thesis, discussed the trends in migration
and remittances in the Philippines in the Philippine Labor Market. It was discovered
that the situations in the market experienced by the host country is greatly mirrored by
emigration. Moreover, pressure exerted on the domestic labor market was found to
have been lessened because emigration formed a division of workers in the overseas
engagements. Migrants generally differ in terms of their destination of work and
occupation.

Furthermore, the thesis conducted by Bulanon and Mula explained the effects
of remittances on income distribution among households across sixteen regions from
1997-2000. The researcher used a correlation analysis to examine their data. Their
dependent variable was Gini Coefficient and their independent variables are male and
females OFWs, households receiving cash, receipts and other forms of assistance
from abroad which served as a proxy variable for overseas remittances, average per
capita income and expenditure and income gap. The result of their study was
distribution of income cannot be fully accounted for by overseas remittances and
employment. The changes in the income gap, a measure of the shortfall of household
income below the poverty line is said to be influenced by the number of OFWs (male
and female), the average annual per capita income and expenditure and the number of
households receiving from abroad.
 III. Data Set
In this study, we made use of multiple linear regressions wherein the equation
used is as follows:

Log (No. of OFWs) = log (GDP destination country ) + log (Population destination country) +
log (Unemployment Rate destination country) + Region destination country + ε

The econometric tests used in this study are the following: the ß Coefficient Test, F-
test, T-test, Durbin-Watson Test, and the various descriptive statistics used to describe
the data set. The data set that was used for the study is shown below.

NO. OF
2005 GDP (in
DEPLOYED UNEMPLOYMENT
NATION REGION million POPULATION
LAND-BASED RATE
dollars)
OFWs
Afghanistan Central 498 21,500 29,928,988 40.0
Bahrain West 10,025 15,796 688,345 15.0
Bangladesh South 350 303,655 144,319,632 40.0
Bhutan South 3 2,913 2,232,291 NA
Brunei Southeast 8,666 9,009 372,361 3.2
Cambodia Southeast 689 30,579 13,607,069 2.5
China East 4,606 8,091,851 1,306,313,856 9.8
East Timor Southeast 730 370 1,040,880 50.0
Hongkong Southeast 94,553 226,766 6,898,686 6.7
India South 392 3,602,894 1,080,264,448 9.2
Indonesia Southeast 2,138 863,654 241,973,872 9.2
Iran West 687 560,348 68,017,860 11.2
Iraq West 0 89,800 26,074,906 25.0
Israel West 5,114 154,174 6,276,883 10.7
Japan East 42,586 4,009,327 127,417,248 4.7
Jordan West 3,832 26,741 5,759,732 15.0
Kazakhstan Central 558 132,700 15,185,844 8.0
Kuwait West 40,248 44,675 2,335,648 2.2
Laos Southeast 164 12,101 6,217,141 5.7
Lebanon West 14,936 23,638 3,826,018 18.0
Libya West 5,326 48,190 5,765,563 30.0
Macau Southeast 2,546 9,100 449,198 4.7
Malaysia Southeast 6,058 289,606 23,953,136 3.0
Myanmar Southeast 151 78,564 42,909,464 5.2
Nepal South 6 39,815 27,676,548 47.0
Oman West 5,293 39,559 3,001,583 15.0
Pakistan South 170 392,526 163,985,376 8.3
Qatar West 31,418 23,584 863,051 2.7
Saudi Arabia West 193,991 337,268 26,417,600 25.0
Singapore Southeast 27,599 124,001 4,425,720 3.4
South Korea East 9,970 983,300 48,422,644 3.7
Sri Lanka South 361 85,155 20,064,776 7.8
Syria West 139 72,174 18,448,752 20.0
Taiwan East 46,714 629,858 22,894,384 4.5
Thailand Southeast 2,400 559,489 65,444,370 1.5
Turkmenistan Central 41 29,380 4,952,081 70.0
U. A. E. West 81,707 111,027 2,563,212 2.4
Uzbekistan Central 3 52,210 26,851,196 0.7
Vietnam Southeast 1,102 231,644 83,535,580 1.9
Yemen West 681 19,324 20,727,064 35.0

Using the E-views program, we have obtained the following values for the
descriptive statistics:
OFWS GDP POPULATION UNEMPLOYMENT RATE
Mean 16575.59 573727.0 94868480 14.81795
Median 2400.000 85155.00 20064776 8.300000
Maximum 193991.0 8091851. 1.31E+09 70.00000
Minimum 0.000000 370.0000 372361.0 0.700000
Skewness 3.460529 3.895357 3.891533 1.651553
Kurtosis 15.99404 18.42217 16.92995 5.205300

Jarque-Bera 352.2125 485.1251 413.7569 25.63252

Probability 0.000000 0.000000 0.000000 0.000003

Observations 39 39 39 39

The mean values in the table are the average values of each of the variables.
The median values are the values that are in the middle of the observations when split
into two. The maximum values are those in the observations with the highest value
while the minimum are the lowest values.
Skewness, on the other hand, is a measure of asymmetry of the distribution of
the series around its mean. A normal distribution has a skewness of zero. As we can
see from the table, all the variables are positively skewed, which means that the
distributions are not normally distributed but have long right tails.
Kurtosis measures the peakedness or flatness of the distribution of a series. A
normal distribution has a kurtosis of three. The kurtosis of all the distributions as seen
in the table indicates that all of the distributions are peaked or leptokurtic relative to
the normal.
The Jarque-Bera probability is a test statistic whether the distribution is
normally distributed. The null hypothesis is that the distribution is normal. Given the
probability above, we reject the hypothesis that the distributions of the variables are
normal.
IV. Econometrics Results
Dependent Variable: LOG(NO__OF_DEPLOYED_LAND_BAS)
Method: Least Squares
Date: 03/31/06 Time: 11:57
Sample: 1 40
Included observations: 38

Variable Coefficient Std. Error t-Statistic Prob.

C 12.89456 2.673085 4.823851 0.0000

LOG(_005_GDP__IN_MILLION_DOL) 1.310079 0.287216 4.561305 0.0001
LOG(POPULATION) -1.247144 0.272129 -4.582919 0.0001
LOG(UNEMPLOYMENT_RATE) 0.362401 0.276368 1.311298 0.1997
SOUTH -2.329813 0.897580 -2.595660 0.0145
EAST 0.349175 1.073171 0.325368 0.7472
CENTRAL -2.828554 0.895020 -3.160326 0.0036
WEST 0.137934 0.642529 0.214673 0.8315

R-squared 0.715996 Mean dependent var 7.611922

Adjusted R-squared 0.649728 S.D. dependent var 2.563657
S.E. of regression 1.517268 Akaike info criterion 3.856363
Sum squared resid 69.06305 Schwarz criterion 4.201118
Log likelihood -65.27091 F-statistic 10.80462
Durbin-Watson stat 1.911762 Prob(F-statistic) 0.000001

The equation for the results is as follows:

LOG(NO__OF_DEPLOYED_LAND_BAS) = 12.89456368 +
1.310079255*LOG(_005_GDP__IN_MILLION_DOL) -
1.247144425*LOG(POPULATION) +
0.3624009144*LOG(UNEMPLOYMENT_RATE) - 2.329813421*SOUTH +
0.3491754543*EAST - 2.828554283*CENTRAL + 0.1379338427*WEST

It means that:

1. GDP of destination countries

Holding all other variables constant, there will be 1.310079 percent increase in
the number of deployed land-based OFWs for every one percent increase in the
GDP of destination countries. This means that OFWs choose richer countries
rather than poor countries.
2. Population of Destination Countries
Holding other variables constant, there will be 1.247144 percent decrease in
the number of deployed land-based OFWs in these countries, for every one
percent increase in the population of destination countries. In short, OFWs tend to
choose countries with lesser population over countries with big populations.

3. Unemployment Rate of Destination Countries

Holding other variables constant, there will be 0.362401 percent increase in
the number of deployed land-based OFWs in destination countries, for every one
percent increase in the unemployment rate in these countries. But as we look to
the probability of the T-statistic, which is 0.1997, we see that it is higher than the
three significance levels, therefore we reject the hypothesis that unemployment
rate affects the number of deployed land-based OFWs in Asia.

4. Regions of destination countries

The base variable used for the five regions is Southeast Asia, which is the
nearest to the Philippines. Based on the econometric results, OFWs are more
likely to go to countries in the Southeast Asia rather than countries in South and
Central Asia. The negative coefficients, -2.329813 for South Asia and -2.828554
for Central Asia, indicate this interpretation. As for East Asia, no significant
difference is found the number of deployed land-based OFWs between East Asia
and Southeast Asia. Neither is there any significant difference in the number of
deployed land-based OFWs between West Asia and Southeast Asia. This maybe
due to other factors, such as the large demand for OFWs in these two regions.
V. Conclusion
In this study, we found out that the number of deployed land-based OFWs in
Asia is affected by the GDP and population of the destination countries. The higher
the GDP of the destination country, the larger the number of land-based OFWs that
enter the country. In contrast, a bigger population in destination country means a
lower number of land-based OFWs entering the destination country. Unemployment
rate, on the other hand, does not significantly affect the number of deployed land-
based OFWs. As for the location of the destination country, OFWs tend to choose to
go to countries in Southeast Asia rather than in countries located in South and Central
Asia. But there is no significant difference found in the number of deployed land-
based OFWs entering countries in Southeast, West and East Asia.

Reference:
Balanon, Ruby Jean & Lara Faye Mula. “Overseas Remittances & Income
Distribution in the Philippines” Undergraduate Thesis. University of the
Philippines Baguio. 2005
Tan, Edita A., “Overseas Employment, Savings Rate & Income Distribution: the
Philippine Case” Discussion Paper No. 9107. August 1991
Tan, Edita A. “Filipino Overseas Employment- an Update” Discussion Paper No. 003.
March 2000

Internet Sources:

CIA World Factbook. http://www.odci.gov/cia/publications/factbook/index.html

POEA “Overseas Employment Statistics” http://www.poea.gov.ph/html/statistics.html
Wikipedia contributors, "Asia," Wikipedia, The Free Encyclopedia,
http://en.wikipedia.org/w/index.php?title=Asia&oldid=46217374