This paper focuses on the role of Confucian clan in risk sharing and examines its dynamic impact on the development of the insurance sector. Strikingly, we find that Confucian clan hindered the development of the insurance sector at the initial stage of modern China while it promoted the development of the insurance sector at the current stage of modern China. Further analyses indicate three potential explanations underlying the contrasting results: the increasing risk unpredictability and severity of losses, the migration of clan members, and the influence of Western culture. The risksharing experience in clan groups enhances individuals’ awareness of insurance, which induces them to embrace formal insurance when clan-based risk sharing is incomplete. Our study provides valuable insights into the relation between informal risk sharing and formal insurance.

This paper examines the relationship between kin-based institutions and the state in the modern economy, exploring how clan captures the local government. Using data from China’s primary land market and a nationwide genealogy dataset, we employ spatial matching to estimate clan’s causal impacts on land parcel prices, which are a crucial source of fiscal revenue for local government. We find that firms linked to local clans obtained 1.3%-3.0% lower prices than those without clanship connections. We show that clan firms get lower prices through collusion with bidders, a process facilitated by local officials. This patron-client relationship leads to a decline in economic growth at the county level, while China’s anti-corruption campaign transforms the economic impact from negative to positive.