Real Effects of Information Frictions Within Regulators: Evidence from Workplace Safety Violations

Real Effects of Information Frictions: When the States and the Kingdom Became United

The American Economic Review ◽

10.1257/aer.20150681 ◽

2018 ◽

Vol 108 (3) ◽

pp. 657-696 ◽

Cited By ~ 29

Author(s):

Claudia Steinwender

Keyword(s):

International Trade ◽

Foreign Market ◽

Trade Flows ◽

Information Flows ◽

Price Difference ◽

Efficiency Gains ◽

Information Frictions ◽

Real Effects ◽

Trade Model

This paper exploits a unique historical experiment to estimate how information frictions distort international trade: the establishment of the transatlantic telegraph in 1866. I use newly collected data on cotton prices, trade, and information flows from historical newspapers and find that the average and volatility of the transatlantic price difference fell after the telegraph, while average trade flows increased and became more volatile. Using a trade model in which exporters use the latest news about a foreign market to forecast expected prices, I estimate the efficiency gains of the telegraph to be equivalent to 8 percent of export value. (JEL D83, F12, F14, L96, N71, N73)

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Information Frictions and Productivity Dispersion: The Role of Accounting Information

The Accounting Review ◽

10.2308/accr-52658 ◽

2019 ◽

Vol 95 (3) ◽

pp. 223-250

Author(s):

Rebecca N. Hann ◽

Heedong Kim ◽

Wenfeng Wang ◽

Yue Zheng

Keyword(s):

Financial Reporting ◽

Manufacturing Sector ◽

Reporting Quality ◽

Efficient Allocation ◽

External Financing ◽

Allocation Of Resources ◽

Information Frictions ◽

Allocation Efficiency ◽

Real Effects

ABSTRACT Prior research documents large, persistent productivity dispersion even within narrowly defined industries, suggesting the presence of frictions that impede the efficient allocation of resources. In this paper, we consider the role of information frictions. We posit that high-quality financial reporting with respect to firm productivity can mitigate information frictions and hence facilitate the efficient allocation of resources across firms. Using a large sample of firms in the manufacturing sector, we find evidence consistent with our prediction—industries with higher productivity informativeness tend to have smaller within-industry productivity dispersion. We further find that this relation is stronger in industries with greater dependence on external financing, suggesting that reporting quality affects allocation efficiency, at least in part, through the capital market channel. These findings suggest that the extent to which financial reporting is informative about productivity can affect resource allocation efficiency and hence have real effects at the macro level.

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