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In this paper, we investigate whether better information about the macroeconomic environment of an economy has a positive impact on its capital inflows, namely portfolio and foreign direct investment (FDI). The purpose of our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we fi nd statistically signi cant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows and use a non-parametric test for spatial correlation in the residuals of capital flows.

Three perspectives on delegation in the European Union are presented in this article. The transaction-costs perspective focuses on information asymmetries between policy makers and implementers. According to the commitment perspective, policy makers delegate authority as a solution to commitment problems. The consensus-building perspective views the decision to delegate as a trade-off between decisiveness and inclusiveness during the bargaining process. Hypotheses are derived from these perspectives regarding the amount of delegation to both the European Commission and to member states in legislation. From detailed information on eighty-six EU laws, there is some evidence for the transaction-costs perspective as an explanation of delegation to the Commission. With respect to delegation to member states, there is some evidence for both the transaction-costs perspective and the consensus-building perspective.

Three perspectives on delegation in the European Union are presented in this article. The transaction-costs perspective focuses on information asymmetries between policy makers and implementers. According to the commitment perspective, policy makers delegate authority as a solution to commitment problems. The consensus-building perspective views the decision to delegate as a trade-off between decisiveness and inclusiveness during the bargaining process. Hypotheses are derived from these perspectives regarding the amount of delegation to both the European Commission and to member states in legislation. From detailed information on eighty-six EU laws, there is some evidence for the transaction-costs perspective as an explanation of delegation to the Commission. With respect to delegation to member states, there is some evidence for both the transaction-costs perspective and the consensus-building perspective. Adapted from the source document.

Vor dem Hintergrund der 2004 durchgeführten Reform auf dem Handwerksmarkt sollte anhand einer theoretisch-empirischen Analyse überprüft werden, ob Informationsasymmetrien bezüglich der Qualität auf dem Handwerksmarkt in unterschiedlicher Stärke auftreten und dementsprechend auch eine differenzierte Regulierung erfordern sowie inwieweit marktendogene und wirtschaftspolitische Lösungsmöglichkeiten zum Abbau von Informationsasymmetrien auf dem deutschen Handwerksmarkt wirken. Als empirische Datengrundlage wurde dazu eine Haushaltsumfrage durchgeführt, die neben der Ermittlung des Informationsnachfrageverhaltens auch die Beurteilung handwerklicher Qualität durch private Bauherren zum Ziel hatte. Die Befragung zeigt, dass trotz des Meisterbriefes Informationsasymmetrien auf den einzelnen Märkten bestehen, so dass eine über alle Gewerke geltende und den Wettbewerb stark einschränkende Regulierung in Frage gestellt werden muss. Die aus den Ergebnissen der Befragung deutlich gewordene Anwendung marktendogener Reputationsmechanismen zur Lösung von Informationsasymmetrien macht gleichzeitig den Schutz der Konsumenten als Regulierungsbegründung fraglich. Dies wird verstärkt durch die in der Befragung deutlich gewordene hohe Nutzung spezialisierter Dritter, die aufgrund ihrer Fachkenntnis keinen expliziten Verbraucherschutz benötigen sollten. Die Handwerksnovelle 2004 stellt somit insbesondere durch die Auflockerung der Marktzutrittsbeschränkungen aus informationsökonomischer Sicht einen Schritt in die richtige Richtung dar. ; Against the backdrop of the 2004 implemented reform of the handicraft market a theoretical and empirical analysis is performed to verify whether information asymmetries regarding the quality of the handicraft market occur in varying strength and, consequently also require a differentiated regulation. The analysis is then extended to identify the effectiveness of endogenous market, as well as, policy solutions to lower the information asymmetries across the german handicraft market. As empirical data basis a survey amongst households was carried out. The goals of the survey were to determine the information gathering behavior as well as the assessment of the handicraft quality by private house builders. The survey shows that despite the master craftsman's diploma information asymmetries exist on the individual markets, so that regulation, spanning across all crafts and severely limiting competition, must be called into question. The results of the survey show the application of market endogenous reputation mechanisms to solve information asymmetries. At the same time this renders the protection of consumers as regulation argument questionable. Furthermore, as the survey suggests, this is amplified through the high use of specialized third parties, who due to their expert knowledge do not require explicit consumer protection. The 2004 handicraft reform thus proves to be a step in the right direction from an information economics viewpoint, especially by lowering the market entry barriers.

Hundreds of "eco-labels" and "social labels" exist for consumer products. These labels claim to provide information about characteristics of these products, which consumers cannot directly observe but which many of them consider desirable, such as low environmental impact, good treatment of workers during production, and relatively high prices paid to the local producers of ingredients from developing countries. Third-party certifiers are supposed to solve the well-known problem that a producer's unilateral declarations lack credibility, given the producer's conflict of interest and the information asymmetries between producer and consumer. Much of the literature on global private regulation—through standards for environmental sustainability, corporate social responsibility, among others—assumes that third-party certification works (i.e., overcomes the problems of producer self-declaration). But closer inspection shows that many third-party certifiers lack credibility. This article examines why some third party certifiers are more credible than others. In doing so, we elucidate the ways in which social capital and trust bolster third party certifiers' credibility. The empirical analysis focuses primarily on Kosher food labels within the global food supply chain. We then explore the consequences of the credibility paradox for other third party certified labels that promote social and environmental values.

Halal certification of financials product may reduce transaction costs for its buyers when it provides a trusted standard for investors that seek to comply with Islamic law. However, we show that in practice it takes considerable amounts of time (20 days ) and money (USD 122,000) to obtain a halal certification. Mainly, this is because the market is very concentrated and forms a closed circuit. About 20 Sharia scholars control more than half the market, of which the top 3 earn an estimated USD 4.5 mln in fees per year. Moreover this market seems plagued by a number of problems, most notably a strong incentive to be excessively lenient in certification, sub-standard governance practices, lack of consensus regarding certification standards and limited knowledge of finance. Therefore it is questionable whether the reduction in transaction costs through halal certification outweighs the costs of certification. Consolidation of the numerous ways halal certifica tion can be obtained and moving halal certification more into the public goods sphere, where a neutral non-profit government induced party should assume the current role of the halal certifiers, may enhance the reputation of certifies and reduce the transaction costs associated with halal certification.

Setting water policy depends fundamentally on the location of the supply and demand for water and the legal/institutional framework for water management. Within and across nations, laws and structures for water management decision making vary, often significantly. Recognizing these differences can aid in overcoming challenges inherent to the assessment and management of transboundary waters. This paper examines current binational efforts to develop the scientific information to support water management decision making along the United States-Mexico border. The particular focus is on transboundary aquifers along the border shared by the states of Arizona in the United States and Sonora in Mexico. Legislation enacted in the United States (Public Law 109–448) established a governmental-academic partnership to assess transboundary aquifers. The paper discusses the establishment of a working partnership between Mexico and the United States, which led to an official binational cooperative framework for transboundary assessment. It explains how the extensive effort to recognize and accommodate asymmetries in the underlying legal and regulatory frameworks for water management was essential to meeting the objectives of both countries. The focus of the binational investigations is briefly discussed. The paper concludes by noting the opportunities for additional cross-border scientific and water management collaboration should funding and institutional commitments continue.

Realists argue that balancing occurs in response to changes to the balance of power. Recent informational approaches have focused primarily on informational asymmetries or commitment problems. The article combines these two approaches and builds on them by incorporating characteristics of the revisionist state and the potential balancer, as well as the specific challenge to the balance of power. The model confirms that informational asymmetries often lead to commitment problems, which are a necessary condition for balancing. However, whether or not informational asymmetries create commitment problems depends on both the nature of the challenger's move and the relative power of the challenger and respondent. The article shows under what conditions balancing is likely to occur and, counter-intuitively, that less revisionist challengers are often more willing to risk being balanced against than are more aggressive challengers. [Reprinted by permission of Sage Publications Ltd., copyright holder.]

Applies the psychological insights of behavioral economics to economic concepts such as moral hazard, deadweight loss, and incidence. Explores how deviations from the standard economic model of decisionmaking--imperfect optimization, bounded self-control, and nonstandard preferences--might affect public finance policy regarding externalities, information asymmetries, poverty, and taxes. - Provided by publisher

Realists argue that balancing occurs in response to changes to the balance of power. Recent informational approaches have focused primarily on informational asymmetries or commitment problems. The article combines these two approaches and builds on them by incorporating characteristics of the revisionist state and the potential balancer, as well as the specific challenge to the balance of power. The model confirms that informational asymmetries often lead to commitment problems, which are a necessary condition for balancing. However, whether or not informational asymmetries create commitment problems depends on both the nature of the challenger's move and the relative power of the challenger and respondent. The article shows under what conditions balancing is likely to occur and, counter-intuitively, that less revisionist challengers are often more willing to risk being balanced against than are more aggressive challengers.

More often than not production processes are the joint endeavor of people having different abilities and productivities. Such production processes and the associated surplus production are often not fully transparent in the sense that the relative contributions of involved agents are blurred; either by lack of information about the actual performance of collaborators or because of random noise in the production process or both. These variables likely influence the surplus sharing negotiations following the production. By means of a laboratory experiment, we systematically investigate their role for the whole bargaining process from opening offers to (dis)agreements and find that uncertainties in surplus production and (even) a very coarse performance information lead to bargaining asymmetries. In addition, we find that bargainers' subjective entitlements are also influenced by performance information and the randomness inherent in the production process. These differences in subjective entitlements together with the differences in entitlements between better and worse performers influence the whole bargaining process and significantly contribute to the differences in bargaining outcomes. -- bargaining ; performance information ; randomness in production process ; entitlements ; experiments

AbstractCreditors routinely impose on a borrowing firm a minimum interest coverage ratio that the firm has to maintain. I show that nonlinear costs of financial distress provide a possible explanation of why firms find it optimal to have an interest coverage ratio covenant in their debt indenture, even in the absence of information asymmetries or agency costs.