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Dynastic management

Caselli, Francesco and Gennaioli, Nicola (2003) Dynastic management. 9442. National Bureau of Economic Research, Cambridge, MA., USA.

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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 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.

Item Type: Monograph (Working Paper)
Official URL: http://www.nber.org
Additional Information: © 2003 Francesco Caselli and Nicola Gennaioli
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: 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 > O1 - Economic Development
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 9442
Date Deposited: 03 Jun 2008 15:26
URL: http://eprints.lse.ac.uk/5299/

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