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

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

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

(Rent Extraction: Public Choice) • Monotonic Relationship . 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.Main argument • It is expected that (As in Djankov et. al.

neither number of procedures). . World Bank • Costs of obtaining a passport = only the fee (not time.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.

Main argument .

Main Argument • Why? • LD = Level of democracy (0 = Strongest. . 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. costs of passport increases.

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

Main Argument • Therefore. 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. .

• They create a model to explain this relationship • BUT. 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. .

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

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

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