Discussion Paper Details

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Title: Private Monopoly and Restricted Entry - Evidence from the Notary Profession

Author(s): Frank Verboven and Biliana Yontcheva

Publication Date: June 2022

Keyword(s): entry restrictions, Occupational Licensing and regulatory policy

Programme Area(s): Industrial Organization and Political Economy

Abstract: We study entry restrictions in a private monopoly: the Latin notary system. Under this widespread system, the state appoints notaries and grants them exclusive rights to certify various important economic transactions, including real estate, business registrations, and marriage and inheritance contracts. We develop an empirical entry model to uncover the current policy goals behind the geographic entry restrictions. The entry model incorporates a spatial demand model to infer the extent of market expansion versus business stealing from entry, and a multi-output production model to determine the markups for real estate and other transactions. We find that the entry restrictions primarily serve producer interests, and give only a small weight to consumer surplus, even conditional on the current high markups. We subsequently perform policy counterfactuals with welfare-maximizing and free entry. We show how reform would generate considerable welfare improvements, and imply a substantial redistribution towards consumers without threatening geographic coverage.

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Bibliographic Reference

Verboven, F and Yontcheva, B. 2022. 'Private Monopoly and Restricted Entry - Evidence from the Notary Profession'. London, Centre for Economic Policy Research.