Information Globalization, Risk Sharing, and International Trade
This paper studies the effect of reductions in information asymmetry - information globalization - on international risk sharing and trade flows. Information frictions are often invoked to explain low levels of international trade beyond those that measured trade frictions (tariffs, transportation costs, etc.) can explain. Using a relatively standard two-country general equilibrium model with asymmetric information about aggregate productivity, we find that more precise information about foreign productivity shocks reduces trade and international risk sharing. In other words, information frictions behave in the exact opposite manner as a standard trade cost.
|Date of creation:||2014|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Dimitra Petropoulou, 2007.
"Information Costs, Networks and Intermediation in International Trade,"
Economics Series Working Papers
370, University of Oxford, Department of Economics.
- Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper 76, Federal Reserve Bank of Dallas.
- Dimitra Petropoulou, 2008. "Information Costs, Networks and Intermediation in International Trade," CEP Discussion Papers dp0848, Centre for Economic Performance, LSE.
- Treb Allen, 2014. "Information Frictions in Trade," Econometrica, Econometric Society, vol. 82, pages 2041-2083, November.
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