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.

A new paper, The Clan and the City, by Avner Greif and Guido Tabellini.