Setting Standards: Information Accumulation in Development

Daron Acemoglu and Fabrizio Zilibotti

No 1641, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Agency Costs; Development; Incentives; Information; Relative Performance Evaluation; Risk Sharing; Sectorial Transformations (search for similar items in EconPapers)
JEL-codes: D82 M13 O14 O40 (search for similar items in EconPapers)
Date: 1997-05
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Setting Standards: Information Accumulation in Development (1997)
Working Paper: Setting standards: Information accumulation in development (1997)
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