No. 2021001                                                                     

July 2021

Haichao Fan, Chang Li, Chang Xue and Miaojie Yu

Abstract

A system of values composes historical traditions, which underlie 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.

Keywords: clans; industrial specialization; informal contracting institutions; migration

JEL: Z10, O10, R12

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      Clan Culture and Patterns of Industrial Specialization in China.pdf