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

See all articles by Chuanchuan Zhang

Chuanchuan Zhang

Central University of Finance and Economics (CUFE) - School of Economics

Date Written: October 22, 2017

Abstract

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

Suggested Citation

Zhang, Chuanchuan, Culture and the Economy: Clan, Entrepreneurship, and Development of the Private Sector in China (October 22, 2017). Available at SSRN: https://ssrn.com/abstract=2865105 or http://dx.doi.org/10.2139/ssrn.2865105

Chuanchuan Zhang (Contact Author)

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing, Beijing 100081
China

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