Dynastic Management

Francesco Caselli and Nicola Gennaioli

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: The most striking difference in corporate-governance arrangements between rich and poor countries is that the latter rely much more heavily on the dynastic family firm, where ownership and control are passed on from one generation to the other. We argue that if the heir to the family firm has no talent for managerial decision making, dynastic management is a failure of meritocracy that reduces a firm's Total Factor Productivity. We present a simple model that studies the macreconomic causes and consequences of dynastic management. In our model, the incidence of dynastic management depends, among other factors, on the imperfections of contractual enforcement. A plausible calibration suggests that, via dynastic management, poor contract enforcement may be a substantial contributor to observed crosscountry differences in aggregate Total Factor Productivity.

Keywords: Meritocracy; Family firms; Financial Development; TFP (search for similar items in EconPapers)
JEL-codes: E1 E2 G1 G3 O1 O4 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dev, nep-eff, nep-knm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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Related works:
Journal Article: DYNASTIC MANAGEMENT (2013)
Working Paper: Dynastic management (2006)
Working Paper: Dynastic Management (2003)
Working Paper: Dynastic Management (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0741

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