Working Paper: NBER ID: w21707
Authors: Randall Morck; Gloria Y. Tian
Abstract: Family-controlled pyramidal business groups were important in Canada early in the 20th century, amid rapid catch-up industrialization, but largely gave way to widely held free-standing firms by mid- century. In the 1970s and early 1980s – an era of high inflation, financial reversal, unprecedented state intervention, and explicit emulation of continental European institutions – pyramidal groups abruptly regained prominence. The largest of these were politically well-connected and highly leveraged. The two largest collapsed in the early 1990s in a recession characterized by very high real interest rates. The smaller groups that survived were more vertically integrated and less diversified at the time. Widely held freestanding firms and Anglo-Saxon concepts of the role of the state soon regained predominance.
Keywords: No keywords provided
JEL Codes: G3; L22; N22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family-controlled pyramidal business groups (L22) | Canada's early 20th-century industrialization (N11) |
| high inflation (E31) | resurgence of business groups in the 1970s and 1980s (L22) |
| state interventionist policies (P16) | resurgence of business groups in the 1970s and 1980s (L22) |
| high-interest rates during a recession (E43) | collapse of major business groups in the early 1990s (G33) |
| unsustainable debt levels (F34) | collapse of major business groups in the early 1990s (G33) |
| economic downturns (F44) | stability of business groups (L22) |