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Information Accumulation in Development

Author

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  • Acemoglu, Daron

    () (Massachusetts Institute of Technology)

  • Zilibotti, Fabrizio

    () (Institute for International Economic Studies, Stockholm University)

Abstract

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.

Suggested Citation

  • Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Information Accumulation in Development," Seminar Papers 652, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0652
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    More about this item

    Keywords

    Information; Development; Agency Costs; Incentives; 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
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • 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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