INFORMAL INSTITUTIONS AND ECONOMIC DEVELOPMENT: ESSAYS ON POLITICAL ECONOMY AND ECONOMIC HISTORY

Abstract

We study how informal institutions interact with formal institutions and their economic outcomes. First, we study how the clan, a kin-based institution, captures the local government in modern China. We find that firms linked to local clans bought land from local governments at lower prices than those without clanship connections, thereby hindering economic development. However, this effect was mitigated by the anti-corruption campaign, which resulted in a positive impact. Second, we examine how political connections shaped the rise and fall of Shanxi banks (piaohao), a dominant cross-regional banking in Qing China. We find that Shanxi banks opened more branches in provinces where the governors came from Shanxi and declined faster in these provinces after the collapse of the Qing dynasty.