The Political Economy of Transparency: What Makes Disclosure Policies Sustainable?

Abstract: Transparency is becoming an important regulatory tool at the domestic and international level. In the United States, the European Union, and developing countries, governments have designed disclosure systems to reduce health and safety risks, minimize corruption of institutions, protect civil rights, and improve public services. This paper explores the dynamics of transparency systems. It examines why some government-created systems improve over time while others stagnate or degenerate into costly paperwork exercises. We first propose a set of metrics for gauging the improvement of transparency systems based on the extent of information use, the quality and accuracy of information, and scope of information provided by a system. Based on those metrics, the paper then evaluates how the political economy of transparency systems determines the degree of improvement over time. We argue that political forces lead those systems to begin as weak political compromises given the concentrated costs placed on disclosers versus the diffuse benefits on potential users. Subsequent to passage, the probability that the policies will improve along the three dimensions mentioned above is contingent on the behavior of information users and disclosers given their comparative benefits and costs of information use or disclosure. We then examine six cases of US-based disclosure policies in detail to evaluate these dynamics. The paper concludes with a series of policy insights arising from the analysis.