Rooted in the Land: Clanship and Land Transfer in China

Abstract

This paper examines the relationship between kin-based clans and the state in the modern economy, exploring how clans can either cooperate with or capture the state. 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-linked firms get lower prices due to their information advantage, collusion with auction participants, and spillover within the home block/town. A higher number of clan transactions is associated with reduced economic growth at the county level, primarily due to clan capture of the state. Political cadres provide rents to clans, as clans assist in accelerating urbanization, an essential promotion incentive for cadres. The corruption between clans and political cadres is evident, as clans with connections to county leaders receive larger discounts, and discounts increase when corrupt provincial/prefectural leaders are in office. We also examine the central government's efforts to strengthen state capacity by analyzing a nationwide anti-corruption campaign launched in 2013, revealing that clans’ discounts dissipated during the inspection. The influenced county experiences economic prosperity alongside a reduction in the influence of clans in the medium term.