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Setting standards: Information accumulation in development
Acemoglu, Daron; Zilibotti, Fabrizio
Universitat Pompeu Fabra. Departament d'Economia i Empresa
We propose a model in which economic relations and institutions in advancedand 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 pooreconomies, thus insufficient information to set the appropriate standards for firm performance. Our model predicts a number of institutional and structural transformations as the economy accumulates capital and information.
Macroeconomics and International Economics
agency costs
relative performance evaluation
risk sharing
sectorial transformations
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