Dynastic Management / Francesco Caselli, Nicola Gennaioli.

Format:

Book

Author/Creator:

Caselli, Francesco.

Contributor:

National Bureau of Economic Research.

Gennaioli, Nicola.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9442.

NBER working paper series no. w9442

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Dynastic management is the inter-generational transmission of control over assets that is typical of family-owned firms. It is pervasive around the World, but especially in developing countries. We argue that dynastic management is a potential source of inefficiency: if the heir to the family firm has no talent for managerial decision making, meritocracy fails. We present a simple model that studies the macreconomic causes and consequences of this phenomenon. In our model, the incidence of dynastic management depends on the severity of asset-market imperfections, on the economy's saving rate, and on the degree of inheritability of talent across generations. We therefore introduce novel channels through which financial-market failures and saving rates affect aggregate total factor productivity. Numerical simulations suggest that dynastic management may be a substantial contributor to observed cross-country differences in productivity.

Notes:

Print version record

January 2003.