System-Level Information Resolution and Contractibility

Abstract

This chapter tests the argument that information resolution is needed for subnational government capital markets by focusing on nationwide information resolution institutions and how they bear upon the activity and size of subnational government capital markets. It presents evidence how contractibility— information transparency, extent of disclosure, and regulatory quality—impact the size of subnational government debt. The analysis establishes that national capacity to resolve information problems in the credit system affect subnational borrowing, other fundamental institutions held constant. This analysis addresses the questions: What aspects of information resolution matter? How does information resolution affect the size of subnational government capital markets?