Foreign advice, policy labels, and diagnostic effort

Foreign advisors often communicate recommendations through a small set of public labels that carry reputational rewards. This study examines how label-based reputation shapes diagnostic effort. An advisor chooses effort to sharpen a private signal about the state and then sends one label from an ordered menu. A local authority observes effort and the label, updates beliefs, and selects an action under quadratic loss with convex implementation frictions. We characterize monotone partition equilibria, allowing unused labels with well-defined off path beliefs. Existence holds under general priors and convex costs and in a Gaussian location specification operative cutoffs are unique when adjacent actions differ. We derive an envelope formula for the marginal value of effort that separates within label action adjustment, posterior reweighting through likelihood scores, and a frequency channel through label usage. The decomposition links diagnostic capacity to both policy intensity and label incidence in recorded advice settings empirically.