ABSTRACT:

This paper studies entry and price restrictions in a private monopoly: the Latin notary system. Under this widespread system, the State appoints notaries and grants them exclusive rights to certify important economic transactions, including real estate, business registrations, and marriage and inheritance contracts. We develop an empirical framework to uncover the current policy goals behind the entry and price restrictions. We estimate a spatial demand model to infer the extent of market expansion versus business stealing from entry; a multi-output production model to infer the size of scale economies and markups; and an entry model to infer the State’s objective function (conditional on the regulated prices). We subsequently perform policy counterfactuals with welfare-maximizing and free entry. We show how policy reform would generate considerable efficiency increases, and decrease the cost of the services to consumers.

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