Dynastic Management

Francesco Caselli and Nicola Gennaioli

No 3767, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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 macroeconomic 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.

Keywords: Family firms; Financial development; Productivity; Growth (search for similar items in EconPapers)
JEL-codes: E10 E20 G10 G30 O10 O40 (search for similar items in EconPapers)
Date: 2003-02
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: DYNASTIC MANAGEMENT (2013)
Working Paper: Dynastic Management (2006)
Working Paper: Dynastic management (2006)
Working Paper: Dynastic Management (2003)
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