TY  - JOUR
AU  - Caselli,Francesco
AU  - Gennaioli,Nicola
TI  - Dynastic Management
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9442
PY  - 2003
Y2  - January 2003
UR  - http://www.nber.org/papers/w9442
L1  - http://www.nber.org/papers/w9442.pdf
N1  - Author contact info:
Francesco Caselli
Department of Economics
London School of Economics
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: (44) (0) 2079557498
E-Mail: f.caselli@lse.ac.uk

Nicola Gennaioli
Department of Finance
Università Bocconi
Via Roentgen 1
20136 Milan, Italy
E-Mail: ngennaioli@crei.cat
AB  - 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.
ER  -