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Setting Standards: Information Accumulation in Development

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  • Acemoglu, Daron
  • Zilibotti, Fabrizio

Abstract

This paper proposes 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. The model predicts a number of institutional and structural transformations as the economy accumulates capital and information.

Suggested Citation

  • Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Setting Standards: Information Accumulation in Development," CEPR Discussion Papers 1641, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1641
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    Citations

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    Cited by:

    1. Rodriguez, Cesar M., 2017. "The growth effects of financial openness and exchange rates," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 492-512.
    2. Stijn Claessens & Erik Feijen, 2006. "Financial Sector Development and the Millennium Development Goals," World Bank Publications, The World Bank, number 7145, August.

    More about this item

    Keywords

    Agency Costs; Development; Incentives; Information; Relative Performance Evaluation; Risk Sharing; Sectorial Transformations;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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