Tall paper walls: The political economy of visas and cross‐border travel

Andy McKay and Tsegay Tekleselassie

The World Economy, 2018, vol. 41, issue 11, 2914-2933

Abstract: Cross‐border travel for business, personal and tourism purposes is an important component of trade in services. In 2013, travel accounted for 25% of services export in the world. Trade in services accounted for 12% of GDP in the world. Hence, the role of travel in many economies is substantial. The current paper studies the determinants of cross‐border flows of people with a particular emphasis on the role of visa policies. We adopt the UN General Assembly Affinity Index, a measure of the quality of bilateral relations between nations, to instrument for bilateral visa policy. We find that, ceteris paribus, imposing visa restrictions on a country reduces travel from that country by about 73% in 2010 implying restrictive visa policies discourage cross‐border travel significantly. This implies an adverse impact of restrictive visa policies on trade‐in‐services.

Date: 2018
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