Discussion Papers In Economics
And Business

Benefit and Cost of Visa relaxation-Empirical Analysis on the Impact of Visa waiverTsuyoshi Goto and Nobuo Akai

Discussion Paper 17-10

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANBenefit and Cost of Visa relaxation-Empirical Analysis on the Impact of Visa waiverTsuyoshi Goto and Nobuo Akai

Discussion Paper 17-10

April 2017

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANBenefit and Cost of Visa relaxation-Empirical Analysis on the Impact of Visa waiver-∗Tsuyoshi GOTO†, Nobuo AKAI‡
April 24, 2017

Abstract
In spite of a heated debate over immigration policies in the world, the eﬀects of visa, which isone of the representative tool for immigration control, are uncertain for some aspects. This paper
analyzes whether visa relaxation has impacts on both legal foreign visitors and illegally overstayed
foreigners focusing on Japanese visa waiver program. The empirical analyses show that visa waiverwill increase both legal travelers and illegally overstayed foreigners while it may have a bigger eﬀect
on legal visitors than overstayed foreigners.

Keywords: Visa; Immigration policy; Policy evaluation
JEL Classification: F22; F68; H56; K37; L51∗ We are very thankful to the staﬀ of Ministry of Foreign Aﬀairs of Japan, Japanese Tourism Agency, Hong Kong

Tourism Board, Sydney and Hong Kong oﬃce of Japan National Tourism Organization, and Hong Kong oﬃce ofJapan Airlines. We appreciate Dr.Victoria Peel and Dr.Onji Kazuki for valuable comments and suggestions. We
also thank Mr.Mikami Ryo, Mr.Yoshizawa Fumiaki, Mr.Kinoshita Yusuke and the participants at Akai Seminar in
Osaka university for precious comments and appreciations, and the Cross Boundary Innovation Program of Osaka
University for financial support. The authors are responsible for all remaining errors.
† Graduate School of Economics, Osaka University. Email: sge010gt@student.econ.osaka-u.ac.jp‡ Osaka School of International Public Policy, Osaka University. Email: akai@osipp.osaka-u.ac.jp

1 Introduction
In many countries, immigration control become a controversial issue of public policy. British government exit the EU because they thought that they cannot aﬀord to receive more immigrant. United states
also choose Donald Trump, who insists that illegal immigrants are a threat, as their president. They try
to introduce several ways to control the flow of foreign visitors while the eﬀects of these measures are
uncertain.
Among them, visa restriction is a typical method to control the flow of foreign visitors. In the international law, all countries have a right to introduce the visa restriction and many countries indeed
make a visa requirement against unwelcome visitors. Neumayer (2006), which is the first empirical research to investigate the visa policy, mentions that visa has the pre-selection role like a virtual borderfor foreign visitors because ‘many countries require airlines not to let anyone enter the aircraft who is
not in possession of a valid visa’ (Neumayer, 2006, p75). As this says the visa restriction may be oneof the most powerful ways to control visitors’ flow. On the other hand, some countries introduce visa
waiver program or the relaxation of visa restriction for certain countries from which they consider they
have few unwelcome visitors. Some countries also often introduce the relaxation of visa as a diplomatic
tool. If the requirement of visa is abolished, we can assume that foreigners can enter into the country
easily. However, it has been unsure whether this statement can be applied to both legal visitors andillegal visitors, and how big the impact of visa waiver is. Then, this paper tries to investigate the eﬀects
on both legal visitors and illegal visitors, and examine whether the visa policy, both visa relaxation andvisa regulation, works as one of the immigration policies.
The eﬀects of visa policies on the legal tourists have been researched. Neumayer (2010a) and Lawson
and Roychoudhury (2016) investigate a impact of visa restriction for foreign visitors using the data of
about 30,000 country pairs. Both of them suggests that the visa restriction reduce the bilateral flow oflegal visitors and the cost of the restriction is high considering the economic impact from tourists. Balliet al.(2013) and Beenstock et al.(2015) investigate the eﬀect of visa waiver program in Turkey and Israel
respectively. They use inbound tourists’ data of each country and suggest that the termination of visa
requirement increase the number of inbound visitors. Xu (2013) compares the similar two countries, oneof which is applied the visa waiver program of the U.S. and the other of which is not so. This paper
suggests the visa waiver program increases inbound visitors to the U.S.. These papers focus on the eﬀect
on legitimated visitors, most of whom are tourists. The estimations of these tourism demand with orwithout a visa factor were researched a lot (Song and Li, 2008 or Witt and Witt, 1995, for example),and this kind of papers employs the income of visitors, the travel cost, exchange rates, and some events
like a war or a tourism campaign as determinant factors of the tourism demand. Therefore, we use thesefactors as well as the dummy of the visa waiver for the analysis of the foreign visitors.
There are fewer papers about other eﬀects of visa than research about tourism demand. Bertoli andMoraga (2012) focuses on the immigrants, who stay in the destination country relatively longer than
tourists, and shows that visa restrictions of each country may reduce the number of immigrants. Neumayer (2010b) shows that visa restrictions may reduce the foreign direct investment and the amount of1

trade between the countries. However, as far as we know, there is no research about visa and illegal
migration although there are some papers about illegal migrant and policy like Pinotti (2017). Then, we
also carry out a regression analysis about visa and illegal migrants.
Considering these two aspects, legal and illegal visitors, we investigate the eﬀects of the visa waiverusing Japanese data. Japanese government employ the visa policy as a diplomatic tool as well as thecontrolling tool of traveler from 2000s*1 . Therefore, we might assume that Japanese visa policy is relatively exogenous. However, as many countries including Japan do so, the visa restriction is usually
implemented in order to control the flow of foreigners or to reduce the number of unwelcome visitors.
Thus, there might be reverse causalities between the visa policy and the number of foreign visitors orillegal migrant. In this paper, we perform Granger causality check and confirm that the eﬀect of such
reverse causalities is relatively low if there are some.
This paper consists of five sections. The following section will explain the Japanese visa system and thesituations about foreign visitors. The empirical analysis about foreign visitors and illegal migrants are investigated in section 3 and section 4 respectively. Section 5 discusses the results and policy implications,and presents concluding remarks.

2 Visa system and foreign visitors in Japan
Japanese visa system is not simple. Foreigners who want to enter Japan have to issue a valid visa
at a consulate of each country before they leave to Japan in principle. Each visitor has to issue a visa
according to his or her status of residence. The visa classification, which is showed as table 1, is linked
to the classification of status of residence though both classification is not completely the same. Before
issuing visa, in principle, visitors, except temporary visitor who issues short-term stay visa, have to
get a certificate of eligibility from representatives in Japan and the representatives have to be issued
the certificate from a regional immigration bureau in Japan. These procedures are time-consuming andvisitors have to prepare visa issuance fee, which is usually 3,000 yen, many documents like a balancestatement for a bank account, and representatives in Japan.
However, travelers with short-term stay visa often are not required such complicated processes because
they need not get a certificate of eligibility and there are some visa relaxation measures depending on
countries. The most popular measure of visa relaxation is visa waiver. If the country of a temporary
visitor is selected as a visa-waived country, he or she can enter Japan without visa. The number ofvisa-waived countries is 67 in January 2017 (table 2). As table 2 shows, visa-waived countries are mainly
western countries while some Latin American and Asian countries are also selected. At a glance, thesevisa-waived countries are relatively high income and have a strong tie with Japan. However, there aresome low or middle income countries which do not necessary have a strong connection with Japan like
Suriname or Lesotho. The permitted period of stay for visa waiver is basically 90 days except Thailand
and Brunei, whose period of stay is 15 days. The list of visa-waived countries can be varied and some

*1 For example, three of five Japanese visa relaxations in 2016 is formally determined in the summit meeting between

the Japanese prime minister and a foreign leader.

2Asian and European countries were added to the list while only Colombia was excluded from it in 2004
as table 3 shows.
Table 1: The visa classification

Source: Ministry of Foreign Aﬀairs of Japan
Table 2: The list of visa-waived country

Source: Ministry of Foreign Aﬀairs of Japan
Table 3: The changes of the visa-waived country list

Source: Ministry of Foreign Aﬀairs of Japan
Another measure of visa relaxation is the issuance of multiple visa. While visitors usually have toissue visa every time they enter Japan, they do not have to issue visa if they have valid multiple visas.
Thus, it makes easier to enter Japan than the ordinal way. However, travelers still have to issue a visa
in this measure and the valid term of multiple visa varies in each country or each individual. Other
measures of visa relaxation include discount of visa issuance fee or changes of criteria for issuing visa
while these are assumed to have less eﬀective than visa waiver because travelers still have to issue visa. In
addition, the information of these minor measure of visa relaxation is not published completely becausesome foreigners may abuse visa system*2 . Thus, we focus on the eﬀect of visa waiver and exclude theother minor visa relaxations as explanatory variables.
*2 For instance, if criteria for issuing visa like a balance of bank account are published, people can borrow much moneyfrom others and mimic as if they are rich. Although we tried to get the information of visa relaxation including minor
measures from the ministry of foreign aﬀairs of Japan, it denied to publish for such a reason.

3

The number of foreign visitors are increasing as figure 1 shows. Most of them enter Japan in theircapacity as short term stayers. Since visa waiver can be applied to short term stayers whose countries are
selected as visa-waived countries, visa waiver may have a great impact on these short term stayers. In
addition to visa waiver, several factors can be considered as factors to increase the number of travelers.
Economic development of Asian countries are one of them. Japan is nearby Korea, Taiwan, China, andSoutheastern Asian countries, where rapid economic growth have been experienced from 1990s. Anotherfactor is the increasing number of airlines represented by low-cost carrier (LCC). This is mainly caused
by deregulation of aviation policies of Japan and other countries*3 and can be assumed as a exogenous
factor. Tourism policy may also aﬀect the tourism demand. Japanese government holds a inboundtourism promotion called ‘Visit Japan Campaign’ (VJC) from 2003. This promotion is mainly heldin selected countries and some research suggest VJC succeeds in inviting a large amount of tourists
to Japan*4 . In addition, as ordinal estimations of tourism demand suggests, weak Japanese yen may
increase the number of tourists.

Figure 1: The number of foreign visitors

Source: Ministry of Justice of Japan*5*3 Japanese government abolished a demand-supply adjustment regulation and approval of tariﬀs and charges in 2000.

China did a similar deregulation in 2004. Indeed, eleven of twenty four aviation companies which have a scheduled
flight in Japan started their frights after deregulation. Considering five companies which were founded after 1995
expecting the deregulation, increasing number of fright can be attributed to deregulation of aviation policies.
*4 Nakazawa (2009) and JNTO (2015) are examples.
*5 Highly skilled professional visa started from 2015 and is omitted since the number of people with it was 2,300, which
is a very small number. Medical stay visa holders, who are very few, are included in short term stayers.

4Figure 2: The stock number of illegally overstayed foreigners at January 1st

Source: Ministry of Justice of JapanOn the contrary to the number of foreign visitors, the number of overstayed foreign nationals (those
who illegally stay beyond their permitted period of stay) has largely reduced as figure 2 shows. In Japan,
the Ministry of Justice record the types of visa, permitted period of stay, and nationalities of each visitor.
From this record, they calculate and publish the number of overstayed foreigner in each year. Since thesenumbers are the stock of overstayed foreigners at January 1st of each year, we have to consider thatseveral factors aﬀects the flow of overstayed foreigners, which is used in our regression. The figure 2
also shows that a large part of overstayed people comes as temporary visitors and this implies that visa
waiver may aﬀect the number of these illegal travelers. Since the permitted term of stay for temporary
visitors is usually 90 days or less and visitors overstayed even more a day than the permitted term arecounted as illegally overstayed visitors, the eﬀect of visa waiver would be shown in the flow of the same
year. Other possible factors for increasing the number of overstayed visitors are a economic factor, a cost
factor, and a policy factor. Large numbers of overstayed visitors come from Asian countries, which havehigh economic growths. Thus, we can guess that people there who might have come to Japan, which
was much richer than their own country in the past, do not come since they become rich. On the other
hand, a cost factor may work as a factor which increase illegals. Travel cost has been getting cheaper
because the number of airlines has increased and people may come to Japan much easier than before.
A policy factor is also important. Japanese government implemented a campaign to halve overstayed
visitors from 2004 to 2009 and is still trying to reduce overstayed people using the know-how employed5

in this campaign*6 .
Considering these backgrounds and factors, the following parts investigate the eﬀect of visa waiver onboth foreign visitor and overstayed people.

3 Empirical analysis about visa waiver and foreign visitors
In order to confirm whether visa waiver has an impact on the number of foreign visitors, we conduct
static and dynamic panel data analysis using the data of 172 countries*7 from 2000 to 2014. Descriptive
statistics and data sources are shown in table 4.
Table 4: Descriptive statistics and data sources
Variables
Foreign visitor
Direct aviation services
GDP per capita
Real exchange rate
Visa Waiver dummy
VJC dummy
Human Development Index
Human Capital Index

Mean
47411.68
870.0815919.19
0.49390.3312
0.05650.66622.4492

Std Dev
232904.2
3987.7118723.6
0.3652
0.46980.23110.16710.6869Min00336.800.016800
0.255
1.0694

Max
301611242376
159825.72
2.66411
1
0.948
3.7342

Number
2556
2580
2580
2580
2580
2580
2413
2145

SourceStatistical Survey on Legal Migrants
OAG Aviation data
Penn World Table
Penn World Table
Treaty Database
White Paper of Tourism
United Nation Development Proglam
Penn World Table

Our main hypothesis is:
Yit = α0 + α1 Iit + α2 Pit + α3 βit .

(1)where Yit is visitors from i to Japan at t, Iit denotes an income in i at t, Pit captures cost factors tocome from i to Japan at t, βit denotes a factor about preference to come to Japan from i at t, and
α0 is constant. We use the number of foreign visitor as an independent variable and several dependent
variables corresponding to the hypothesis above.
GDP per capita is expected to capture the income level, which reflects the economic growth in eachcountry, and its coeﬃcient is assumed to be positive since richer people can aﬀord to travel abroad. We
employ three variables that represent cost factors and are the number of direct aviation service, realexchange rate, and visa waiver dummy. The number of direct aviation service between Japan and eachcountry is used to explain the cost to travel and its coeﬃcient will be positive. Although some research
use the distance to capture this eﬀect, we do not employ it since it is time-invariant and is omitted in
the fixed-eﬀect model we used. Real exchange rate is yen basis and would capture a cost factor, where
inbound visitor will increase if the rate is high, which is equivalent to weak yen*8 . Therefore, expected
coeﬃcient of real exchange rate is positive. The main explanatory variable is visa waiver dummy, whichtakes one if visa is waived in the whole year and takes the value between zero and one which shows how
many days visa waiver is implemented*9 if visa waiver is introduced in the middle of the year. It takes zerootherwise. Since visa waiver would allow foreigners to travel easily, the coeﬃcient will be positive. The
dummy variable of VJC represents a preference factor since people would like to travel if advertisements
by VJC are successful. It takes one if VJC is implemented there and takes zero otherwise. Then, itscoeﬃcient should be positive. In addition to them, we employ GDP, population, nominal exchange rate,*6 Pre-clearance of visitors in departed airport and Advance Passenger Information System (APIS), which check theinformation of passengers of each airlines, were introduced in 2005 and both are still employed.
*7 The list of countries is shown in appendix.
*8 The composition of real exchange rate is shown in the appendix.
*9 It is equal to (Days when visa waiver implemented in a year)/365.

6the amount of trade and year dummies while we conduct analyses. Except the results about year dummy,
these results are sited in appendix.
Table 5: Empirical results of static panel analysis
VARIABLES(1)Fix-eﬀect Panelvisitor(2) Fix-eﬀect PanelvisitorVisa waiver

129,308**
128,493**(51,501)(51,371)
Direct aviation services
50.02***
49.76***(DAS)(7.378)(7.285)GDP per capita-0.195-0.327(GCP)(0.303)(0.308)
Real exchange rate
21,912**
14,767(RXR)(11,038)(12,744)
Visit Japan Campaign
79,721***
81,151***(VJC)(29,696)(29,624)Constant-52,023**-45,578**(21,004)(18,774)
Year dummy
No
Yes
2
2
Sargan-Hansen
χ (4)=45.65***
χ (17)=34.67***
Observations
2,556
2,556
R-squared
0.580
0.585
Number of code
172
172
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

The empirical results of static panel analyses are shown at table 5. The results show that the coeﬃcientof visa waiver is significantly positive and about 129,000, while the significant level are diﬀerent among
the models. These coeﬃcients are quite small compared to the former research except Beenstock etal.(2015). This may be because the former research use panel data with short time series and fixedcharacteristics might not be captured there, while Beenstock et al.(2015) and we use data with relatively
long time series. The signs of other coeﬃcients are shown as we expected except GDP per capita. Thismight be because Japan has many visitors from low or middle income countries in Asia like China andSoutheastern Asian countries.
In addition to the static panel analysis, we conduct dynamic panel analysis since the trend of inbounddemand seems to be dynamic and we could employ this method thanks to large data size*10 . In thisanalysis, the hypothesis is modified as
Yit = γYit−1 + α0 + α1 Iit + α2 Pit + α3 βit .

(2)

We use the first order GMM estimation, which tells consistent estimators without assumptions about
initial condition. In order to obtain the result, we use two-step weight matrix as a weight of GMM. The
contraction of each variable we employed is the same as a static panel’s one.

*10 Unfortunately, dynamic panel analysis is not feasible in the analysis for illegal overstayed foreigners because thesample size is limited there. We now try to get broader data set.

7

Table 6: Empirical results of dynamic panel analysis
VARIABLES
L.visitor
Visa waiver
Direct aviation services(DAS)
Real exchange rate
(RXR)
GDP per capita(GCP)
Visit Japan Campaign(VJC)
Constant
Pre-determined variable
Observations
Number of code

(1) First Diﬀerence GMM Panelvisitor(2) First Diﬀerence GMM Panelvisitor

0.517***(0.0151)
95,417***(18,265)
36.39***(0.473)45,450***(5,230)0.826(0.510)18,883**(7,847)-53,764***(9,550)2,212
172
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

0.529***(0.00948)
82,756***(27,850)
36.67***(1.718)34,466***(4,098)0.0808(2.083)21,063(20,459)-42,150*(22,922)
VISA
2,212
172

The empirical results of dynamic panel analyses are shown at table 6. Column (1) shows the result
where VISA is a exogenous variable, while the result of column (2) assumed VISA is a pre-determinedvariable. The results show that the coeﬃcient of visa waiver is significantly positive while its magnitude issomewhat lower than statistic panel’s one. The signs of most coeﬃcients are the same as statistic panel’s
one though some of their significancy and magnitudes are changed. From the result, the significancy andmagnitude of real exchange rate become strong. On the other hand, the dummy of visit Japan campaign
become weaker. However, GDP per capita is still insignificant here. This may show GDP per capita
irrelevant to inbound demand of Japan.
We also check the Granger causality from the number of visitors to visa waiver as table 7 shows.
Though only three-years-lagged variables show that the number of visitors may increase the probabilityof visa waiver, the causality does not seem to exist. While we also conduct regressions including fouryears-lagged variables, these results do not show causality even in three-years-lagged variables.
Table 7: Granger causality check
VARIABLES
visitor 1
visitor 2
visitor 3
Constant(1) Probit
Visa waiver(2) OLS
Visa waiver-3.42e-07(9.19e-07)-5.91e-07(1.24e-06)
2.25e-06*(1.19e-06)-0.455***(0.0296)

4.76e-09(2.31e-07)
2.07e-08(2.83e-07)
3.41e-07(2.61e-07)
0.325***(0.0106)

Observations
2,040
2,040
R-squared
0.025Standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

While we should conduct regressions including instrumental variables (IV) considering the endogeneity,
it is diﬃcult to find concrete example of IV for visa. Then, we conduct panel analyses with checking theGranger causality as is often the case. If any, the endogeneity of visa would work for overestimation ofcoeﬃcient of visa waiver, although our results are very small comparing to the former research. Anyway,
as a result, we show that the eﬀect of visa waiver exist but is smaller than it is suggested in the previous

8papers.

4 Empirical analysis about visa waiver and the illegally overstayed foreigners
As well as legal foreign visitors, visa waiver may increase illegal immigrants since it allows them toenter Japan easily. In this section, we investigate whether visa waiver increase overstayed foreigners,
who we choose as an representative of various types of illegal immigrants, employing the data of 13
countries*11 from 2000 to 2014. Since the published data of overstayed foreigners are limited only worst
ten countries in a year, the number of countries in the data is limited compared to the analysis of legal
visitors. Descriptive statistics and data sources are shown in table 8.
Table 8: Descriptive statistics and data sources
Variables
Overstayed foreigners (flow)
Direct aviation services
GDP per capita
Real exchange rate
Visa Waiver dummyMean-851.46
7213.1915688.71
0.36780.1936

Std Dev
1576.48
10566.61
16387.57
0.20560.3906Min-7560
01174.420.0449
0

Max
3846
42376
72743.53
1.17601

Number
180
195
195
195
195

SourceImmigration Control ReportOAG Aviation data
Penn World Table
Penn World Table
Treaty Database

Note that we use the flow data which is equal to the stock in the current year minus the stock in theprevious year. This is because descriptive statistics of overstayed foreigners shows negative value.
Our main hypothesis is:
Yit = α0 + α1 Iit + α2 Pit .

(3)

where Yit is visitors from i to Japan at t, Iit denotes an income in i at t, Pit captures cost factors tocome from i to Japan at t, and α0 is constant. Thought there might be preference factors like easinessfor overstayed visitor to live in Japan, such factors are not available and we do not use Visit Japan
Campaign dummy since it is a tourism promotion policy, not an overstay promotion. We use the flow ofoverstayed foreigners as an independent variable and several dependent variables corresponding to the
hypothesis above as we do in the previous section. GDP per capita represents income of each countries
and its coeﬃcient is expected to take negative value since visitors from poorer countries would overstay
more. The number of direct aviation service, real exchange rate, and visa waiver dummy will capture
the cost to travel. Since increase of these values means the reduction of travel cost, these coeﬃcientsare presumed to be positive while the coeﬃcient of real exchange rate can be negative because sending
money in stronger yen will be reasonable for overstayed foreigners. The composition of each variable
are the same as we explained in the previous section. In addition to them, we employ GDP, population,
nominal exchange rate, the amount of trade and year dummies while we conduct analyses. In particular,
year dummies will capture the eﬀect of the governmental campaign to halve overstayed visitors from2004. Except the results about year dummy, these results are sited in appendix.
The empirical results are shown at table 9. Although most of explanatory variables are not significant,the three of four coeﬃcients about the visa waiver dummy are significantly positive and take values ofaround 900. These results for visa waiver are consistent with our main hypothesis, which is that visa
waiver will increase the number of overstayed foreigners. Comparing the eﬀect on legal visitor, these*11 The list of countries is shown in appendix.

9coeﬃcients are relatively small. Most of the other explanatory variables are insignificant and the signsof them vary from model to model except real exchange rate. This is may be because low real exchange
rate in yen basis means strong yen, where overstayed foreigners can send more money in terms of theircurrency.
Table 9: Empirical results(1)Fixed-eﬀect Panel
Overstayed foreigner

VARIABLES(2)Fixed-eﬀect Panel
Overstayed foreigner

Visa waiver

892.9*(455.9)Direct aviation services-0.0392(DAS)(0.0593)
GDP per capita
0.0163(GPC)(0.0221)
Real exchange rate
-627.0(RXR)(1,214)
Constant-761.2**(309.8)Year dummyNo
2Sargan-Hansen
χ (4)=24.65***
Observations
180
R-squared
0.029
13
Number of code
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

968.0**(337.1)-0.0464(0.0438)
0.00602(0.0141)-530.5(1,508)-1,026**(418.1)
Yes
180
0.332
13

We also check the Granger causality from the flow of overstayed foreigner to visa waiver as table 10shows. From this results, the causality does not seem to exist.
Table 10: Granger causality check
VARIABLES
Overstayed foreigner (OF) 1
OF 2
OF 3
Constant(1) Probit
Visa waiver(2) OLS
Visa waiver-2.84e-05(0.000101)-8.19e-06(0.000169)
3.72e-05(9.20e-05)-0.728***(0.153)-9.62e-06(3.12e-05)-1.83e-06(5.26e-05)
1.23e-05(2.86e-05)
0.210***(0.0481)

144

144
0.009

Observations
R-squaredStandard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

As well as the previous part, the results in this section may be aﬀected by endogeneity. In particular,
the endogeneity of visa waiver policy might exist, while we check that there are not the Granger causality
from the number of overstayed visitor to visa waiver.
In addition, the analyses in this section are conducted with limited sample comparing to the analyses
in section 3. Thus, an analysis with a more sophisticated method or a large sample data is needed. However, we firstly show that visa waiver would increase overstayed foreigners and its impact on overstayed
foreigners might be small comparing with its impact on legal visitors.

5 Concluding remarks
Considering the results of section 3 and 4, can we say that we should abolish visa restriction or weshould make more strict visa system? Perhaps we cannot say either clearly because the results show that10

visa waiver will increase both legal visitors and illegally overstayed foreigners. Neumayer (2010a, 2010b)
and Lawson and Roychoudhury (2016) insist that the each government in the world should abolish visa
restriction since it will increase tourists, investments, or trades among the countries referring to theirempirical results that show visa restriction impede the good interactions among the countries. However,since visa system itself was enacted to protect a country from unwelcome people like potential oﬀenders
and terrorists, the side eﬀect of visa waiver should be considered. From our results, there may be an
unfavorable side eﬀect in visa waiver. Therefore, the governments should use visa policies taking it into
account.
In addition, our results also show that the eﬀect of visa waiver is smaller in overstayed foreigners
than in legal visitors. From this, it can be suggested that the net economic eﬀect of visa waiver will bepositive. However, potential social welfare loss by criminals of illegal foreigner is unaccountable since
the losses by a murder or a terror cannot be converted into economic measures easily. Ignorance ofoverstay caused by visa waiver may also lead to ignorance of situations of overstayed people since they
are sometimes exploited because of their illegitimacy. Some overstayed people have no choice but towork under the minimum wage because they cannot work as legitimated workers do. Indeed, somepeople have been arrested for exploiting overstayed foreigners in Japan*12 . While these ethical aspectsof overstayed foreigner are out of the range of this paper, policymakers should consider these aspects aswell as economic eﬀects of visa.
The indicator, illegally overstayed foreigners, which we employed perhaps should be reconsidered since
they include the number of those who just overstayed even a day but not commit other crimes. However,
the arrest rate of overstayed people is obviously and significantly higher than legal visitors*13 . In addition,even if they do not commit a crime, overstay itself is illegal in Japan. Thus, this indicator is reasonable
to employ in this context.
As we discuss, visa relaxation is not a simple issue. Thus, other policies like tourism promotions orderegulation of aviation market would be suitable to implement if the government want to increase thenumber of inbound travelers eliminating potential illegal foreigners, since these policies are suggested to
be valid in this paper. Anyway, this paper can oﬀer a diﬀerent point of view about visa policy and wehope that visa policy will be considered from both legal and illegal visitors.
Finally, we have to remark that our analyses are dependent on some assumption and limited data.
In particular, endogeneity between visa waiver and the dependent variables should be examined withmore sophisticated methods, though we checked the Granger causalities. In addition, other aspects orother policies about immigration control can be examined as extensions of this research. For example,
the diﬀerent type of visa relaxation like issuance of multiple visa can be researched if there is refined
data. In order to obtain a further insight into immigration control policy, more sophisticated research
are needed.

*12 The Mainichi news paper on November 21st in 2012, for example, reported that Indonesian man was arrested because

he introduced overstayed foreigners to some companies and deducted the income of these foreigners unjustly.
*13 The arrest rate of the criminal law by overstayed foreigners is 0.4% while 0.2 % by all people in Japan (including

legal visitors) and 0.02% by legal foreign visitors (National Police Agency, 2016a 2016b).

11

Appendix
1 The list of countries employed in the analyses
Table A1: The list of countries employed in the analysis of legal visitors

Table A2: The list of countries employed in the analysis of overstayed foreigners

2 Composition of real exchange rate
Exchange rates between currencies and currency units vary from country to country. For example, one
unit of Korean won is equal to about 0.1 Japanese yen while U.S. dollar is equal to about 110 yen. In
reality, the perception for these units should be changed and converted into a united criterion. Thus, we
calculate a nominal exchange rate of each currencies in yen basis first and set its rate in 2000 as a unity
using the data from Penn World Table. Denote this modified nominal exchange rate as mnxrit . Penn
World Table shows the price level of household consumption, plc , in each country at each year using
the level of one in U.S. 2011 as a unity. Then, when we denote Japanese plcit as Jplcit , modified realexchange rate, mrxrit that we employed in the analyses ismrxrit =mnxrit × plcit.
JplcitNote that this real exchange rate is yen basis and the lower it is, the stronger yen is realized.

3 Results when other variables are employed
We conduct several analyses with other variables than we employed in the table 5, 6, 9. Table A3
and A4 shows the results of static panel analyses about legal visitors and illegally overstayed foreigners
respectively.

12

Table A3: Empirical results of analyses about legal visitors with other variables
VARIABLES
Direct aviation services(DAS)
GDP per capita(GPC)
Nominal exchange rate
(NXR)
Visa waiver
VJC(1)Fixed-effectvisitor(2)Fixed-effectvisitor(3)Fixed-effectvisitor(4)Fixed-effectvisitor(5)Fixed-effectvisitor(6)Fixed-effectvisitor50.06***(7.363)-0.0699(0.314)
13,752*(7,952)
128,211**(51,030)
83,342***(29,610)49.72***(7.278)-0.354(0.305)
15,482(11,123)
127,352**(50,888)
81,399***(29,464)

41.75***(14.88)41.55***(14.79)44.55***(13.41)-0.351(0.352)44.26***(13.42)-0.470(0.361)

145,792**(62,190)
56,129*(31,359)
0.0566(0.0350)-1,189*(657.8)17,416*(9,449)145,215**(62,207)59,604*(31,194)
0.0571(0.0349)-1,221*(641.6)
9,102(8,825)

138,129**(56,839)
70,103**(31,828)

137,413**(56,870)
71,483**(32,028)

17,304*(9,296)
1.21e-05(1.25e-05)-53,713**(21,878)
No

11,668(10,205)
1.22e-05(1.27e-05)-48,100**(19,922)
Yes

0.585
172

0.590
172

GDP
Population(POP)
Real exchange rate
RXR
Trade
Constant
Year dummy
Observations
R-squared
Number of code

-56,443**(24,143)
No
2,556
0.578
172

-55,462**-29,468-22,540(22,436)(29,178)(27,120)
Yes
No
Yes
2,556
2,556
0.585
0.603
0.608
172
172
172
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

Table A4: Empirical results of analyses about overstayed foreigners with other variables
VARIABLES
Visa waiver
GDP per capita(GPC)
Direct aviation services(DAS)
Nominal exchange rate
(NXR)
GDP

(1)Fixed-effectOverstayed Foreigners(2) Fixed-effectOF(3) Fixed-effectOF(4) Fixed-effectOF(5) Fixed-effect
OF(6) Fixed-effectOF

881.0*(457.4)0.0124(0.0225)-0.0427(0.0542)-132.1(713.5)979.7**(336.7)-0.00463(0.0238)-0.0496(0.0464)
841.7(1,618)1,200(751.6)754.7(503.2)-0.0826(0.118)-0.0801(0.0746)829.6(654.3)0.0159(0.0226)-0.0192(0.134)

1,068**(475.9)0.00980(0.0122)-0.0744(0.109)0.000688*(0.000329)-55.36***(17.08)-877.5(656.3)0.000772***(0.000214)-83.35***(24.08)-128.4(1,238)-394.6(515.9)-4.22e-08(1.69e-07)-795.8**(317.2)
No
180
0.031
13

-907.6(1,151)
6.15e-08(1.35e-07)-1,004**(382.3)
Yes
180
0.335
13

Population(POP)
Real exchange rate
(RXR)
Trade
Constant
Year dummy
Observations
R-squared
Number of code

-783.2(632.9)
No
180
0.027
13

-1,891
8,674**(1,303)(3,072)
Yes
No
180
180
0.334
0.063
13
13
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

12,560***(3,678)
Yes
180
0.364
13

References
F. Bail, H.O. Bail, and K. Cebeci, 2012, Impacts of exported Turkish soap operas and visa-free entry
on inbound tourism to Turkey, Tourism Management, 23 p.1-7
M. Beenstock, D. Felsenstein, and Z. Rubin, 2015, Visa waivers, multilateral resistance and international tourism: some evidence from Israel, Letters in Spatial and Resource Sciences, 8(3) p.357-371.
S. Bertoli and J. F-H. Moraga, 2012, Visa policies, networks and the cliﬀ at the border, IZA discussion
papers 7094.
X. Hu, 2013, Economic benefits associated with the visa waiver program -a diﬀerence-in-diﬀerence
approach, Global Journal of Business Research, 7(1) p.81-89.
Immigration bureau in ministry of justice, 2003-2016, Immigration control, Tokyo.
Japan national tourism organization, 2015, Hounichi gaikokujinkankoukyaku zoukanimuketa marketing
senryaku [Marketing strategies to increase inbound tourists to Japan.], Transportation and Economy,
75(9) p.17-22, in Japanese.
R. A. Lawson and S. Roychoudhury, 2016, Do travel visa requirements impede tourist travel?, Journalof Economic Finance, 40(4) p.817-828.

13

Ministry of foreign aﬀairs of Japan, 2000-2016, Diplomatic Bluebook, Tokyo.
E. Nakazawa, 2009, Hounichi kankokyakusu no kettei youin: gravity model wo mochiita yuchiseisaku
no hyoka [Determinants of demand of inbound tourists to Japan: an evaluation of tourism promotion
policy with gravity model.], Toyo Gakuen University business and economic review 2(3) p. 27-58, inJapanese.
National police agency, 2016a, Rainichigaikokujin hanzai no kenkyo jyoukyou [Report about inboundforeign criminals], Tokyo, in Japanese.
National police agency, 2016b, The white paper on police 2015, Tokyo.
E. Neumayer, 2006, Unequal access to foreign spaces: How states use visa restrictions to regulate
mobility in a globalized world, Transactions of the British Institute of Geographers, 31 p.72-84.
E. Neumayer, 2010a, Visa Restrictions and Bilateral Travel, The Professional Geographer, 62(2) p171181.
E. Neumayer, 2010b, On the detrimental impact of visa restrictions on bilateral trade and foreign
direct investment, Applied Geography, 31 (3). p. 901-907.
P. Pinotti, 2017, Clicking on heaven’s door: the eﬀect of immigrant legalization on crime, American
Economic Review, 107(1) p.138-168.
H. Song and G. Li, 2008, Tourism demand modeling and forecasting-a review of recent research,
Tourism Management, 29(2) p203-220.
S. F. Witt and C. A. Witt, 1995, Forecasting tourism demand: a review of empirical research, International Journal of Forecasting, 11(3) p.447-475.

14