Haichao Fan, Chang Li, Chang Xue, Miaojie Yu†
Abstract: A system of values composes historical traditions, which underly the fundamental institutions of a society. We show that the clan, an extant social organization formed 2,000 years ago, affects the patterns of industrial specialization in China today. We find that industries dependent on relationship-specific investments tend to cluster in prefectures with strong clans. Our findings are robust to alternative measures, controlling for the long-lived civil examination system (Keju), and instrumental variable estimations. The firm-level analysis further shows that the effects mainly originate from an overall improvement of the contracting environment by the clan culture.
Key Words: clans; industrial specialization; informal contracting institutions; migration
JEL codes: Z10, O10, R12
† Haichao Fan, Institute of World Economy, School of Economics, Fudan University, Shanghai, China and a research fellow at Shanghai Institute of International Finance and Economics, Shanghai, China, Email: email@example.com. Chang Li, School of Economics, East China Normal University, Shanghai, China, Email: firstname.lastname@example.org. Chang Xue, Department of Economics and Management, Wuhan University, Wuhan, China, Email: email@example.com. Miaojie Yu, China Center for Economic Research, Peking University, Beijing, China, Email: firstname.lastname@example.org.