Referee Report on “Regulation of exit

Political Economy of Passport Costs”
By Timur Natkhov and Leonid Polishchuk

Presented in the 18th Annual Conference of The International Society for New Institutional
Economics (ISNIE) held at Durham, NC, USA, 2014.

Darcio Genicolo Martins

Institutional Environment – Prof. Paulo Furquim – 11/26/2015

Referee Report on “Regulation of Exit”. Brief Summary 2. Guide 1. General Comments .

Motivation • Regulation of Exit  Costs of obtaining a passport .

costs of obtaining a passport can vary from 1% of the GDP per capita to over 100%.Motivation • Fact: According to the data presented by the authors. • Why does that happen? .

Main questions • What are the consequences of the regulation of exit? • Costs of obtaining a passport • Emigration issues • Who gets the rents from the regulation? • Consumers? Industry? Politicians? .

2002) Costs of obtaining a passport depend on regulatory quality and government effectiveness. al. (Rent Extraction: Public Choice) • Monotonic Relationship .Main argument • It is expected that (As in Djankov et. • Less efficient government + worse quality of regulation  costs of obtaining a passport would be higher.

Main argument • Argument of the paper: there is an association between Level of Democracy and the Regulation of Exit. • But the authors found a Non-linear (quadratic) association • Sample: 127 countries. World Bank • Costs of obtaining a passport = only the fee (not time. . neither number of procedures).

Main argument .

1 = Weakest) • From 0 to LD* (max cost of obtaining a passport): traditional explanation • Bureaucrats.Main Argument • Why? • LD = Level of democracy (0 = Strongest. costs of passport increases. politics: • Strong democracies  no room for Rent Extraction • LD increases  Extraction of rents increases • Then. .

Low-skilled labor force  press the price factors down – Control political risks  unions. poverty .Main Argument • Why? • LD = Level of democracy (0 = Strongest. 1 = Weakest) • From LD* to 1: • Very weak democracy: • Organized Business groups  Lobbies to decrease exit barriers  Costs of passport decrease  Emigration increases – Calibrate High-skilled vs.

but also (and mainly) as a Regulation of Emigration flow. the authors think the costs of obtaining a passport not only as a way of Regulation of international travel.Main Argument • Therefore. .

• They create a model to explain this relationship • BUT. . • The authors have found a non-linear relationship between Costs of obtaining a passport and Level of democracy. THEY DO NOT USE ANY VARIABLE CONCERNING EMIGRATION.General comments • Interesting approach • Status: Very initial phase • They do not test the main testable proposition: relation between Regulation of Exit and Emigration.

• What about other costs (time.)? Could it give a different result? • They argued that. • Some results seem reasonable but there is not much detail about it. • The model the authors present lacks of clarity and proofs. Is it true? • They do not make clear the threshold (poor vs. Rich countries).General comments • They use only costs of passport (fees). there is a positive correlation among them. usually. . procedures etc.

. • However. Good potential. it needs relevant improvements in order to be ready to be published.Recommendation • Promising idea.

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