Social Embeddedness, Power Balance, and Local Governance in China

Why are informal institutions beneficial to local governance in some context but harmful in others? This research argues that local governance outcomes are jointly determined by social embeddedness – the extent to which local community leaders connect with their community members through informal ties, and power balance – the extent to which political power is balanced among local ruling elites to prevent it being captured by informal groups. We test our theory by investigating how informal lineage groups interact with formal political power to influence village governance in China. Using a four-round survey (2005–2016) in rural China, we find that village political leaders whose power is oligopolistically shared by two large clans distributed higher land-taking compensation to land-dispossessed households, while village leaders whose power is monopolized by one large clan paid less. This is because socially embedded village officials from the monopolized ruling clan are better able to fragment collective resistance, buy off aggrieved villagers, and collude with the state. The research reconciles the positive and negative perspectives of the role of informal institutions in local governance and highlights the effect of social embeddedness on local governance is conditional on the balance of power among local ruling elites.