Dynastic management
By: Francesco Caselli and Nicola Gennaioli
Contributors: Gennaioli, Nicola; London School of Economics and Political Science. Centre for Economic Performance
Series: CEP discussion paper -- no. 741
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2006
Place of publication: London
Language: eng
Format: [electronic resource] /
Description: 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.
Notes: Title from PDF file (viewed on Sept. 28, 2006).

"August 2006."

Includes bibliographical references.

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