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Setting Standards: Information Accumulation in Development

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  • Acemoglu, D.
  • Zilibotti, F.

Abstract

We propose a model in which economic relations and institutions in advanced and less developed economies differ as these societies have access to different amounts of information. This lack of information makes it hard to give the right incentiv es to managers and entrepreneurs. We argue that differences in the amount of informaiton arise because of the differences in the scale of activities in rich and poor economies; namely, there is too little repetition of similar activities in poor economies , thus insufficient information to set the appropriate standards for firm performance. Our model predicts a number of institutional and structural transformations as the economy accumulates capital and information.

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Bibliographic Info

Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 97-6.

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Length: 42 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:mit:worpap:97-6

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: (617) 253-3361
Fax: (617) 253-1330
Web page: http://econ-www.mit.edu/
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Keywords: INFORMATION ; RISK ; DEVELOPING COUNTRIES;

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References

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  1. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 58(2), pages 377-409, December.
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Cited by:
  1. Stijn Claessens & Erik Feijen, 2006. "Financial Sector Development and the Millennium Development Goals," World Bank Publications, The World Bank, number 7145, August.

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