Family Ties Can Bind Growth

Russell Davies/Creative Commons

"Fredo, you're my older brother, and I love you. But don't ever take sides with anyone against the family again. Ever."
—Michael Corleone in The Godfather

The family business is an economic and cultural icon, but it turns out it’s also like building a moat around the ancestral estate—nothing gets in or out. A new paper by UCLA Anderson Assistant Professor of Economics Paola Giuliano argues deep reliance on family also breeds distrust of outsiders that limits economic growth and stunts labor-market participation.

The paper, co-written with Alberto Alesina, Harvard University’s Nathaniel Ropes Professor of Political Economy, for the Institute for the Study of Labor in Bonn, Germany, studied the role “family ties may play in determining fundamental economic attitudes” and found that, while they might bring a certain level of happiness and satisfaction, family ties negatively affect economic development, as well as political participation and the formation of institutions.

Highlighted on the June 12^th episode of Freakonomics on the Marketplace podcast, the research sheds light on the macroeconomic implications for nations more historically reliant on family structures, such as Italy and many Asian and Latin American countries.

Check out the Freakonomics podcast here and read the paper here.