DP1641 Setting Standards: Information Accumulation in Development
|Author(s):||Daron Acemoglu, Fabrizio Zilibotti|
|Publication Date:||May 1997|
|Keyword(s):||Agency Costs, Development, Incentives, Information, Relative Performance Evaluation, Risk Sharing, Sectorial Transformations|
|JEL(s):||D82, M13, O14, O40|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1641|
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.