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

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

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%. • Why does that happen? .Motivation • Fact: According to the data presented by the authors.

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? .

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

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

Main argument .

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

Main Argument • Why? • LD = Level of democracy (0 = Strongest. Low-skilled labor force  press the price factors down – Control political risks  unions. poverty . 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.

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

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

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

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