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Asymmetric Information, Auditing Commitment, and Economic Growth

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  • Wai‐Hong Ho
  • Yong Wang

Abstract

We analyze in this paper the growth and welfare consequences stemming from the lack of auditing commitment in a credit market with costly state verification. By studying two endogenous growth models, one of which allows lenders to commit to costly auditing strategies, whereas the other does not, we show that the inability to commit serves as a source of informational friction that results in more stringent contractual terms, which, in turn, result in lower capital accumulation, growth, and welfare. From the policy perspective, our analysis suggests a new micro‐economic channel through which institutional failings hinder economic growth and social welfare. Information asymétrique, engagement à la vérification et croissance économique. On examine les conséquences sur la croissance et le niveau de bien‐être du manque d'engagement à la vérification dans un marché du crédit où la vérification coûte cher à l'État. En étudiant deux modèles de croissance endogène – l'un dans lequel les prêteurs s'engagent à des stratégies de vérification coûteuses, et l'autre pas – on montre que l'inhabileté à s'engager est à la source de friction informationnelle qui résulte en des contrats avec des exigences de conformité plus rigoureuses, qui, à leur tour, se traduisent en accumulation de capital, croissance et bien‐être réduits. Du point de vue de la politique publique, l'analyse suggère un nouveau canal microéconomique à travers lequel le bruit institutionnel se traduit par un ralentissement de la croissance économique et du bien‐être social.

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  • Wai‐Hong Ho & Yong Wang, 2013. "Asymmetric Information, Auditing Commitment, and Economic Growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 611-633, May.
  • Handle: RePEc:wly:canjec:v:46:y:2013:i:2:p:611-633
    DOI: 10.1111/caje.12025
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