Do Deep Roots Explain Firm Management Practices?

Management practices in firms differ widely between countries according to research summarized by economistsNicholas Bloom and John Van Reenen.   The differences between well-managed firms and those that are poorly managed are significant and could help explain differences inTotal Factor Productivity (TFP) between countries.   In the field of economic history, economistsLouis Putterman and David N. Weil (henceforth P&W) found that the length of time that a population of a country has lived with a centralized state and with settled agriculture (henceforth, Deep Roots) are powerful predictors of their GDP per capita today.   Perhaps there is a relationship between firm management practices by country and that country’s Deep Roots?P&W tested their Deep Root ’s hypothesis by creating a matrix of contemporary populations of each country based on their population’s ancestral origin in the year 1500.  They use a variable called state history that measures how long a country has lived under a supra-tribal government, the geographic scope of that govern ment, and whether that government was controlled by locals or by a foreign power.  Their second variable is agricultural history and it measures the number of millennia that have passed since a country transitioned from hunting and gathering to agriculture.  P&W then combined the matrices of ancestry with the Deep Roots variables to show how long each national origin group was governed by a centralized state and how long th...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs