Like Father, like Son: Toward an Economic Theory of Occupational Following

Abstract

It used to be common, if not expected, that a son would grow up and take over the family business or follow in his father's footsteps. Although less prevalent today, we still observe varying degrees of occupational following in business, politics, the arts, agriculture, and other occupations. How can the observed pattern of variation in magnitude of occupational following be explained in economic terms? We seek to provide an answer to this question by arguing that following is sometimes an efficient mechanism whereby intergenerational transfers of property rights are effected. In essence, we view wealth transfers between generations as either tangible (cash, real or personal property) or intangible. Intangible transfers take the form of specialized knowledge, goodwill, brand (or name) loyalty, and other types of family-specific capital whose present value cannot be fully captured (realized) by the parent. The value of this family-specific capital can be captured only by children who follow in their parents' occupational footsteps, and diminishes in value if children choose to enter an occupation which is different from that of their parents. From the son's standpoint, inheritance of valuable name-brand capital represents a rent-transfer, whereas the transfer of career-specific human capital requires investment by the recipient-son . The son as recipient of a rent-transfer incurs no opportunity cost; the son in the later category does incur an opportunity cost, as he must spend time with his