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Information Accumulation in Development
Masachusetts Institute of Technology.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1998 (English)Report (Other academic)
Abstract [en]

We propose a model in which economic relations and intritutions in advanced and less developed countries differ as these societies have access to different amounts of information. The lack of information in less developed economies makes it hard to evaluate the performance of manager, and leads to high "agency costs". Differences 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 partly because the scarcity of capital restricts the repetition 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 exerting 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.

Place, publisher, year, edition, pages
Stockholm: IIES , 1998. , 51 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 652
Keyword [en]
Information, Development, Agency Costs, Incentives, Relative Performance Evaluation, Risk Sharing, Sectorial Tranformations
National Category
URN: urn:nbn:se:su:diva-41045OAI: diva2:327989
Available from: 2010-07-01 Created: 2010-07-01 Last updated: 2010-07-02Bibliographically approved

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