The Moderating Effect of Informal Institutions: Clans and Straw Burning in China

ABSTRACT Despite the implementation of a straw‐burning prohibition in 1999, widespread straw burning has still persisted in rural areas over the past two decades. However, there has been little research on the role informal institutions play in this issue. Drawing on village‐level data from the 2015 to 2023 China Household Finance Survey, this paper aims to examine the interaction between clans, the most important form of informal institutions in rural China and straw burning. The estimated results show that clans have a facilitating effect on village‐level straw burning, though this effect is weakened to some extent when the straw‐burning prohibition policy is introduced. Mechanism analysis reveals that the influence of clans on straw burning is notably stronger when clan members hold leadership positions within the village. Larger village populations and higher rates of non‐grain farming further amplify this effect. Further analysis indicates that the presence of multiple clans within a village also contributes to increased straw burning. Our findings suggest that the effectiveness of straw‐burning policies reflects the broader interplay between formal and informal institutions, highlighting the need to consider the influence of informal institutions when enforcing such policies.