Information Accumulation in Development
We propose a model in which economic relations and institutions in advanced and less developed countires differ as these societies have access to different amounts of information. The lack of information in less developped economies makes it hard to evaluate the performance of managers, and leads to high "agency costs". Differencies in the amount of information have a variety of sources. As well as factors related to the informational infrastructure, we emphasize that societies accumulate information by repeating certain tasks. Poor societies may therefore have less information partly because the scarcity of capital restricts the repitition of various activities. Two implications of our model are: (i) as an economy develops and generates more information, it achieves better risk-sharing at a given level of effort, but because agents are exirting more effort and the types of activities are changing, the overall level of risk-sharing may decline; (ii) with development, the share of financial intermediation carried out through market institutions should increase.
(This abstract was borrowed from another version of this item.)
When requesting a correction, please mention this item's handle: RePEc:kap:jecgro:v:4:y:1999:i:1:p:5-38. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.