Read my lips: The role of information transmission in multilateral reform design |
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Authors: | Silvia Marchesi Laura Sabani |
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Affiliation: | a Università di Milano Bicocca, Italyb Centro Studi Luca D'Agliano, Italyc Università di Firenze, Italyd University of Goettingen, Germanye KOF Swiss Economic Institute, Switzerlandf IZA, Germanyg CESIfo, Germany |
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Abstract: | Context-specific knowledge is crucial to crafting multilateral reform programs. Nonetheless local knowledge often consists of unverifiable information, thus the quality of countries' reports depends on the conflict of interests faced by the recipient and the multilateral. We compare the performance of a “delegation-scheme” against a “centralization-scheme.” We find that recipients' discretion in the choice of reforms (delegation) should only be increased when the countries' local knowledge is strictly more important than the multilateral's information. Conversely, a reduction in the conflict of interests may lead the multilateral in to allowing the recipient less freedom in designing reforms (centralization). Our empirical results support these theoretical predictions. |
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Keywords: | C23 D82 F33 O1 |
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