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Dynastic management

Caselli, Francesco and Gennaioli, Nicola (2013) Dynastic management. Economic Inquiry, 51 (1). pp. 971-996. ISSN 0095-2583

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Identification Number: 10.1111/j.1465-7295.2012.00467.x


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 (TFP). We present a simple model that studies the macroeconomic 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 cross-country differences in aggregate TFP. © 2012 Western Economic Association International.

Item Type: Article
Official URL:
Additional Information: © 2012 Western Economic Association International
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance
Date Deposited: 06 Jun 2012 12:45
Last Modified: 20 Oct 2021 00:47
Projects: Ramon y Cajal Grant
Funders: Spanish Ministerio de Ciencia y Tecnologia, Barcelona GSE Research Network

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