Abstract

This study examines the long-term impact of the permanent forced military service system during China's Ming dynasty (between 1368 and 1644) on modern contracting institutions. The military service quota was apportioned by clan, which obligated the nonservice family members to compensate the selected member for life for his sacrifice. The system required the signing of a formal contract stipulating the rights and obligations of both parties and their accountability for breach of contract, because traditional clan rules, which emphasized only the obligations and punishment of the young generation, were ineffective. We argue that the formal contracts embody the modern contracting attitude. The baseline estimates show that the permanent forced military service system significantly affected modern contracting institutions. We conduct 2SLS estimation to test the robustness of the results. Our findings prompt us to reflect on the role of clans in China's modern economic growth.