Dynastic Management

41 Pages Posted: 26 Mar 2003

See all articles by Francesco Caselli

Francesco Caselli

London School of Economics & Political Science (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Nicola Gennaioli

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: February 2003

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 macroeconomic 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.

Keywords: Family firms, financial development, productivity, growth

JEL Classification: E10, E20, G10, G30, O10, O40

Suggested Citation

Caselli, Francesco and Gennaioli, Nicola, Dynastic Management (February 2003). CEPR Discussion Paper No. 3767. Available at SSRN: https://ssrn.com/abstract=390103

Francesco Caselli (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nicola Gennaioli

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Register to save articles to
your library

Register

Paper statistics

Downloads
26
Abstract Views
1,361
PlumX Metrics