This paper examines how traditional informal institutions shape preferences for old-age support and the emergence of initiative-based long-term financial planning. Using data from the China Health and Retirement Longitudinal Study combined with clan genealogy records, we estimate the causal impact of exposure to clan culture on old-age support preferences. We find that stronger exposure to clan culture in early life is associated with a higher likelihood of adopting modern preferences for old-age support, characterized by greater reliance on self-initiated savings and pension participation rather than dependence on children. The results are robust to instrumental variable estimation and placebo test. Importantly, the effect operates exclusively through exposure to clan culture during early life, while clan culture encountered in adulthood has no significant influence, particularly among individuals who relocate later in life. Mechanism analysis suggests that peer effects, generalized trust, income growth, and financial literacy jointly mediate the relationship between clan culture and old-age support preferences. We further show that the expansion of the formal pension system complements, rather than crowds out, the influence of clan culture, consistent with a process of co-evolution between informal and formal institutions. The effects are stronger among individuals with favorable attitudes toward clans, rural residents, and men. Finally, modern preferences induced by clan culture translate into higher pension participation and larger financial asset holdings. Overall, the findings highlight how informal institutions can shape economic preferences and facilitate the adoption of formal financial arrangements.

We examine whether and how the cultural background of corporate chairpersons, specifically clan culture, influences firm-to-firm lending decisions. Using hand-collected data on Chinese entrusted loans, a major segment of the country’s shadow banking sector, we find that firms led by chairpersons from prefectures with stronger clan culture are more likely to originate entrusted loans and charge lower spreads. We identify distinct mechanisms governing affiliated versus nonaffiliated transactions. In affiliated lending, our evidence suggests an in-group favoritism channel: culturally embedded chairpersons support affiliated parties despite higher ex-post default risk. Conversely, non-affiliated lending operates via an informational channel, where the positive impact of clan culture is more pronounced when geographic barriers are low, and manifests in larger size dispersion. Overall, our findings highlight the dual role of cultural norms in shadow banking, demonstrating that clan culture facilitates credit allocation while generating sharply different efficiency implications across relationship-based and arm’s-length markets.

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.