DP9072 The Clan and the City: Sustaining Cooperation in China and Europe

Author(s):	Avner Greif, Guido Tabellini
Publication Date:	July 2012
Keyword(s):	China, Europe, Institutions, Public goods, Values
JEL(s):	N00, O10, O50, P51, Z10
Programme Areas:	International Macroeconomics, Public Economics, Development Economics, Economic History
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=9072

Over the last millennium, the clan and the city have been the locus of cooperation in China and Europe respectively. This paper examines - analytically, historically, and empirically - the cultural, social, and institutional co-evolution that led to this bifurcation. We highlight that groups with which individuals identify are basic units of cooperation. Such groups impact institutional development because intra-group moral commitment reduces enforcement cost implying a comparative advantage in pursuing collective actions. Moral groups perpetuate due to positive feedbacks between morality, institutions, and the implied pattern of cooperation.