Information Resolution and Subnational Capital Markets

A comprehensive explanation of information institutions as they relate to the success of subnational capital markets

Global trends in decentralization and the growing role of world cities have increased the importance of infrastructure development. But with competing incentives of suppliers and borrowers of capital in the web of institutional governance arrangements, information problems are inevitable. Understanding how local choices affect these larger trends can help national and city actors not just avoid being paralyzed by information problems, but actually improve information resolution.

In this book Christine R. Martell, Tima Moldogaziev, Salvador Espinosa argue that capital markets are a viable financing alternative for subnational borrowers. They explain how subnational governments can manage their fiscal and debt choices to leverage capital markets to finance efficient, effective, and equitable infrastructure provision. The book builds on previous work by exploring the role of information institutions as they relate to the success of subnational capital markets and by advancing options for subnational government to gain agency as active market participants.

With broad geographic coverage, Information Resolution and Subnational Capital Markets answers core questions: How does information permeate the landscape and outcomes of subnational government borrowing, both at the aggregate national level and at the city level? What measures and mechanisms can national and subnational governments take to resolve information problems? And, what can cities do to enhance their agency vis-à-vis central governments and capital market actors, so that they can command a voice in managing internal and external sources of capital financing?

Christine R. Martell is a nationally-recognized scholar of public finance and budgeting with expertise in subnational government and municipal capital markets, fiscal institutions and fiscal decentralization, debt and financial instrument design, and citizens and governance. Dr. Martell is a
professor at the University of Colorado Denver. She has consulted with the Inter-American Development Bank and the International Food Policy Research Institute, and has instructed courses across the globe for the U.S. Treasury, Columbia University, and Lincoln Institute of Land Policy.

Tima T. Moldogaziev is an associate professor in the School of Public Policy at the Pennsylvania State University. His primary research interests are in public sector management and organizational behavior, regional and local policy and governance, and capital infrastructure financing and fiscal
policy.

Salvador Espinosa is a public finance and public policy scholar with expertise in local government finances, subnational capital market development, and the application of behavioral insights to public policy and regulatory design. He is the founder of the Public Affairs Behavioral Lab at the School
of Public Affairs in San Diego State University, where he conducts research combining cognitive, behavioral, and economic sciences to study financial decision-making.

Dedication
Preface
Acknowledgments
Abbreviations and Acronyms

Chapter 1: Subnational Capital Finance
Chapter 2: A Theory of Subnational Government Capital Market Information
Chapter 3: Review of Literature on Subnational Government Borrowing
Chapter 4: System-level Information Resolution and Contractibility
Chapter 5: Information Resolution, Information Content, and City Debt
Chapter 6: Understanding, Managing, and Communicating Credit Fundamentals
Chapter 7: Three Contexts of Information Resolution Reforms
Chapter 8: Subnational Government Capital Financing: Lessons for Policy and Practice

References
Index