When Informal Institutions Backfire: Village Evidence of Rising Pollution

Are informal institutions always beneficial? Leveraging China's clan networks, this study examines the impact of informal institutions on air pollution across over 300,000 villages. Results indicate that informal institutional strength unexpectedly increases pollution, and these findings remain robust when using historical war frequency and dialect diversity as instrumental variables. The primary mechanisms underpinning this outcome are driven by data manipulation stemming from elite capture. Notably, while hometown mayors exacerbate pollution associated with informal institutions, hometown party secretaries mitigate such pollution effects. This study highlights the environmental downsides of informal institutions and illuminates the complex dynamics between informal and formal institutions.