Information Accumulation in Development

Daron Acemoglu and Fabrizio Zilibotti

No 652, Seminar Papers from Stockholm University, Institute for International Economic Studies

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.

Keywords: Information; Development; Agency Costs; Incentives; Relative Performance Evaluation; Risk Sharing; Sectorial Transformations (search for similar items in EconPapers)
JEL-codes: D82 M13 O13 O14 O40 (search for similar items in EconPapers)
Pages: 51 pages
Date: 1998-10-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Information Accumulation in Development (1999)
Working Paper: Information Accumulation in Development (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0652

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