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Setting standards: Information accumulation in development

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  • Daron Acemoglu
  • Fabrizio Zilibotti

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 incentives to managers and entrepreneurs. We argue that differences in the amount of information 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 Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 212.

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Date of creation: Mar 1997
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Handle: RePEc:upf:upfgen:212

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Information; development; agency costs; incentives; relative performance evaluation; risk sharing; sectorial transformations;

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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, October.

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