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Dynastic management

Caselli, Francesco and Gennaioli, Nicola (2006) Dynastic management. 741. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 741

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.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2006 F. Caselli and N. Gennaioli
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment
G - Financial Economics > G3 - Corporate Finance and Governance
G - Financial Economics > G1 - General Financial Markets
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
O - Economic Development, Technological Change, and Growth > O1 - Economic Development
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 28 Feb 2008
Last Modified: 01 Oct 2010 08:50
URI: http://eprints.lse.ac.uk/id/eprint/3558

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