Publication:
Is Better Information Always Good News? International Corporate Strategy and Regulation

Loading...
Thumbnail Image
Files in English
English PDF (487.58 KB)
263 downloads
English Text (102.12 KB)
60 downloads
Date
2012-10
ISSN
Published
2012-10
Editor(s)
Abstract
This paper develops a simple model to analyze the interaction between strategic corporate public good provision, international firm location and national regulation. An information-based strategic corporate public good provision mechanism is proposed to shed light on recent firm behavior within different regulatory environments. The main insight derived is that in the presence of firms with geographic flexibility (multinational enterprises) and market provision of an international public credence good, unilateral (non-cooperative) regulatory scope depends on (1) the absolute probabilities to verify firms' corporate public good provision levels within different geographic and institutional environments, and (2) the differential between these probabilities across countries. The relative information asymmetry determines not only the market levels of the public good produced under autarky, but also the relocation incentives of multinational enterprises. A firm trades off lower production costs, which increase its competitiveness in pricing, with higher expected informational price premiums, which decrease its competitiveness. A government's ability to regulate above market (corporate public good provision) levels decreases with the absolute level of foreign transparency, while it increases in the relative (positive) difference between the same transparency at home and abroad. This may not only explain mixed empirical evidence of theoretic propositions such as the Pollution Haven Hypothesis and Regulatory Race to the Bottom dynamics, but also open up interesting policy implications as the international information playing field becomes leveled through development, while existing regulations are rather rigid, and policy coordination remains limited.
Link to Data Set
Citation
Kitzmuller, Markus. 2012. Is Better Information Always Good News? International Corporate Strategy and Regulation. Policy Research Working Paper; No. 6251. © World Bank. http://hdl.handle.net/10986/12092 License: CC BY 3.0 IGO.
Associated URLs
Associated content
Report Series
Report Series
Other publications in this report series
  • Publication
    The Asymmetric Bank Distress Amplifier of Recessions
    (Washington, DC: World Bank, 2025-07-11) Kim, Dohan
    One defining feature of financial crises, evident in U.S. and international data, is asymmetric bank distress—concentrated losses on a subset of banks. This paper proposes a model in which shocks to borrowers’ productivity dispersion lead to asymmetric bank losses. The framework exhibits a “bank distress amplifier,” exacerbating economic downturns by causing costly bank failures and raising uncertainty about the solvency of banks, thereby pushing banks to deleverage. Quantitative analysis shows that the bank distress amplifier doubles investment decline and increases the spread by 2.5 times during the Great Recession compared to a standard financial accelerator model. The mechanism helps explain how a seemingly small shock can sometimes trigger a large crisis.
  • Publication
    From Tailwinds to Headwinds
    (Washington, DC: World Bank, 2025-07-10) Balatti, Mirco; Kose, M. Ayhan; McKinnon, Kate; Palombo, Edoardo; Sugawara, Naotaka; Verduzco-Bustos, Guillermo; Vorisek, Dana
    The first quarter of the twenty-first century has been transformative for emerging market and developing economies (EMDEs). These economies now account for about 45 percent of global GDP, up from about 25 percent in 2000, a trend driven by robust collective growth in the three largest EMDEs—China, India, and Brazil (the EM3). Collectively, EMDEs have contributed about 60 percent of annual global growth since 2000, on average, double the share during the 1990s. Their ascendance was powered by swift global trade and financial integration, especially during the first decade of the century. Interdependence among these economies has also increased markedly. Today, nearly half of goods exports from EMDEs go to other EMDEs, compared to one-quarter in 2000. As cross-border linkages have strengthened, business cycles among EMDEs and between EMDEs and advanced economies have become more synchronized, and a distinct EMDE business cycle has emerged. Cross-border business cycle spillovers from the EM3 to other EMDEs are sizable, at about half of the magnitude of spillovers from the largest advanced economies (the United States, the euro area, and Japan). Yet EMDEs confront a host of headwinds at the turn of the second quarter of the century. Progress implementing structural reforms in many of these economies has stalled. Globally, protectionist measures and geopolitical fragmentation have risen sharply. High debt burdens, demographic shifts, and the rising costs of climate change weigh on economic prospects. A successful policy approach to accelerate growth and development should focus on boosting investment and productivity, navigating a difficult external environment, and enhancing macroeconomic stability.
  • Publication
    Intergenerational Income Mobility around the World
    (Washington, DC: World Bank, 2025-07-09) Munoz, Ercio; Van der Weide, Roy
    This paper introduces a new global database with estimates of intergenerational income mobility for 87 countries, covering 84 percent of the world’s population. This marks a notable expansion of the cross-country evidence base on income mobility, particularly among low- and middle-income countries. The estimates indicate that the negative association between income mobility and inequality (known as the Great Gatsby Curve) continues to hold across this wider range of countries. The database also reveals a positive association between income mobility and national income per capita, suggesting that countries achieve higher levels of intergenerational mobility as they grow richer.
  • Publication
    The Macroeconomic Implications of Climate Change Impacts and Adaptation Options
    (Washington, DC: World Bank, 2025-05-29) Abalo, Kodzovi; Boehlert, Brent; Bui, Thanh; Burns, Andrew; Castillo, Diego; Chewpreecha, Unnada; Haider, Alexander; Hallegatte, Stephane; Jooste, Charl; McIsaac, Florent; Ruberl, Heather; Smet, Kim; Strzepek, Ken
    Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.
  • Publication
    Global Poverty Revisited Using 2021 PPPs and New Data on Consumption
    (Washington, DC: World Bank, 2025-06-05) Foster, Elizabeth; Jolliffe, Dean Mitchell; Ibarra, Gabriel Lara; Lakner, Christoph; Tettah-Baah, Samuel
    Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.
Journal
Journal Volume
Journal Issue

Related items

Showing items related by metadata.

  • Publication
    The Cost of Adjustment to Green Growth Policies : Lessons from Trade Adjustment Costs
    (World Bank, Washington, DC, 2012-10) Porto, Guido
    Green growth policies confront firms and workers with adjustments that may create welfare costs for different segments of the population and cause reductions in near-term actual versus potential gross domestic product. There is little evidence on the cost of adjustment to climate change measures, and only limited evidence for more general environmental policies, especially in developing countries. Therefore, this paper canvasses the research on adjustment costs to trade policies to draw analogies and highlight differences compared with the potential impacts of green growth policies. Trade policies affect prices and work directly on technology choice. In the presence of adjustment costs, firms may experience impacts on wages, employment, and incentives to adopt alternative technologies. Both types of trade policy impacts may be amplified by technology availability and credit constraints. Many green growth policies are likely to work via the same mechanisms, that is, taxes on emissions or changes in technology requirements. However, trade liberalization is typically seen as offering higher total incomes, albeit with winners and losers. Green growth policies are thought of as welfare-enhancing at the collective level but may not be income-enhancing at the individual level. This implies much more difficulty in measuring the potential gains associated with green growth policies.
  • Publication
    Risks and Opportunities of Participation in Global Value Chains
    (World Bank, Washington, DC, 2014-04) Gereffi, Gary; Luo, Xubei
    This is a background paper to the 2014 World Development Report. Risk is inherent to the pursuit of opportunity. This paper surveys the recent literature and looks at the risks and opportunities firms and their workers face in the global value chains. First, it examines the risk-sharing mechanisms that firms provide from the national and global perspectives; second, it takes a closer look at the new opportunities and challenges for firms and individuals in the global arena; third, it discusses the role of economic upgrading and social upgrading; and finally it sheds light on how the government can help people manage risks and reap the benefits in the participation of global value chains.
  • Publication
    What Explains Prevalence of Informal Employment in European Countries : The Role of Labor Institutions, Governance, Immigrants, and Growth
    (2011-12-01) Hazans, Mihails
    This paper looks into institutional and other macro determinants of prevalence of informal dependent employment, as well as informal self-employment, in European countries, using European Social Survey data on work without legal contract in on 30 countries, covering years 2004-2009. Consistently with theoretical predictions, quality of business environment has a significant negative impact on prevalence of both types of informal employment. The share of non-contracted employees is negatively affected by perceived quality of public services and positively related to economic growth. Informal self-employment is positively related to growth in Europe at large, as well as in Eastern and Southern Europe. The level of GDP per capita also has a positive impact on the prevalence of informal employment in Europe at large and within Eastern and Southern Europe, whilst an opposite effect is found in Western and Northern Europe. Other things equal, the share of non-contracted employees in the labor force across European countries increases with the minimum-to-average wage ratio, with union density, with the share of first and second generation immigrants, and with income inequality, but falls with stricter employment protection legislation (EPL) and higher tax wedge on labor. Thus it appears that in Europe at large, labor cost effects of EPL and taxes are weaker than their impact via perceptions of job security and law enforcement, along with tax morale and the income effect. Yet the EPL effect on informality is positive (i.e., cost-related) when either Eastern and Southern Europe or Western and Northern Europe are considered separately. Furthermore, within Western and Northern Europe, the minimum wage effect is negative, whilst within Eastern and Southern Europe, the union effect is negative; in both cases, we offer a supply side explanation.
  • Publication
    Avenues for Export Diversification
    (World Bank, Washington, DC, 2009) Walkenhorst, Peter; Brenton, Paul; Newfarmer, Richard
    While diversification of exports is often a desirable trade objective, it is far from clear how best to tap into new opportunities. This paper discusses the range of avenues of diversification, including (i) expanding the range of markets into which existing products are sold (geographic diversification); (ii) upgrading the value of existing products, including agricultural exports (quality diversification); and (iii) taking advantage of opportunities to expand non-merchandise exports (services diversification), in addition to introducing entirely new export products. All offer opportunities for cost?effective positive policies relating to the incentive regime, backbone services, and export support institutions.
  • Publication
    Clusters of Competitiveness
    (Washington, DC: World Bank, 2013) Nallari, Raj; Griffith, Breda
    Competitiveness is a broad subject with applications at the level of the firm, industry, region, nation, and global economy. Each one of these aspects has a rich literature drawn on by academics and policy makers over a long period. This book seeks to present a broad overview of the main ideas underlying competitiveness and its applications, highlighting, and discussing in greater depth the topics that are of relevance currently. The book draws out the experiences of and lessons for developing economies and examines in detail the role for policy. This paper is structured as follows: chapter one addresses competition and competition policy; chapter two examines competitiveness by analyzing its many different indicators; chapter three looks further at indexes of national competitiveness that describe international competitive performance; chapter four addresses innovation, an increasingly important aspect of competitiveness; and chapter five discusses competitiveness and clusters.

Users also downloaded

Showing related downloaded files

  • Publication
    Lebanon Economic Monitor, Fall 2022
    (Washington, DC, 2022-11) World Bank
    The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.
  • Publication
    Classroom Assessment to Support Foundational Literacy
    (Washington, DC: World Bank, 2025-03-21) Luna-Bazaldua, Diego; Levin, Victoria; Liberman, Julia; Gala, Priyal Mukesh
    This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.
  • Publication
    The Journey Ahead
    (Washington, DC: World Bank, 2024-10-31) Bossavie, Laurent; Garrote Sánchez, Daniel; Makovec, Mattia
    The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.
  • Publication
    Argentina Country Climate and Development Report
    (World Bank, Washington, DC, 2022-11) World Bank Group
    The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.
  • Publication
    World Development Report 2006
    (Washington, DC, 2005) World Bank
    This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.