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Setting Standards: Information Accumulation in Development

  • Acemoglu, Daron
  • Zilibotti, Fabrizio

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1641.

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Date of creation: May 1997
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Handle: RePEc:cpr:ceprdp:1641
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  1. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  2. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Agency costs in the process of development," Seminar Papers 607, Stockholm University, Institute for International Economic Studies.
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  14. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  15. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  16. David K. Backus & Patrick J. Kehoe & Timothy J. Kehoe, 1992. "In search of scale effects in trade and growth," Staff Report 152, Federal Reserve Bank of Minneapolis.
  17. Townsend, Robert M, 1995. "Financial Systems in Northern Thai Villages," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1011-46, November.
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  19. Robert M. Townsend, 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 83-102, Summer.
  20. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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