Family Control and the Rent-Seeking Society

Abstract

Examine how differences in typical ownership structure in various countries can impact economic development.Governance of a country’s wealthiest corporations by a few families, permitting concentrations of high trust among the wealthy but encouraging little external trust, promotes political rent seeking (i.e., currying political favor), which has been found to stifle economic growth. Using game theory and other statistical analyses, data from various published sources are examined regarding the level of family control of the largest firms and middle-size firms in 27 rich and middle-income countries, as well as the quality of economic development, physical infrastructure, health care provision, education system, government, and social development.Measures of trust and corruption are also examined. Findings show that when businesses are under the control of oligarchic families, when there is political rent seeking, and where poverty exists, each element perpetuates the others. Also, such families are good at gaining political favoritism but fear change and innovation. It is concluded that what is required for economic development is a different distribution of trust and cooperation.Additional suggestions for ways to promote economic development by reducing political rent seeking by the elite are presented. (JSD)

Keywords: Ownership structures, Trust, Corruption in government, Rent-seeking, Political participation, Organizational structures, Resistance to change, Trust relationships, Family firms, Wealth, Economic growth