Culture and the Economy: Clan, Entrepreneurship, and Development of the Private Sector in China
63 Pages Posted: 7 Nov 2016 Last revised: 30 Sep 2018
Date Written: October 22, 2017
This paper examines the relationship between culture and the economy, investigating the role of clan in China's unprecedented development of the private sector. Using inter-census population survey and economic census data, I find that China’s clan culture is positively associated with the likelihood of entrepreneurship and the share of economy in the private sector. Exploring possible mechanisms, I find that clan culture helps privately-owned enterprises overcome financing constraints and escape from local government’s “grabbing hand.” In addition, this clan culture is significantly related to a set of individual values, which are arguably relevant for private business. Finally, I find that the support of clan culture for private business is limited as it deters private businesses from growing into large firms. The results also suggest that the role of clan culture reduces as formal institutions develop.
Keywords: Culture, Clan, Institutions, Entrepreneurship, Private Sector, China
JEL Classification: J21, O10, P20, R12, Z10
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