Family Structure, Institutions, and Growth: The Origin and Implications of Western Corporatism

There is a vast amount of literature that considers the importance of the family as an institution. Little attention, however, has been given to the impact of family structures on institutions, their dynamics, and the ability to change them. This limits our ability to understand distinct institutional developments B and hence growth B in the past and the present. This paper illustrates this by highlighting the importance of the European family structure in one of the most fundamental institutional changes in history. This change has been the emergence of economic and political corporations in late medieval Europe. >Corporations= are defined here, consistent with their historical meaning, as intentionally created, voluntary, interest-based, and self-governed permanent associations. Guilds, fraternities, universities, communes and city-states are some of the corporations that dominated Europe in the past. Businesses and professional associations, business corporations, universities, consumer groups, republics and democracies are some of the corporations in modern economies. Providing institutions through corporations is a novelty. Historically, the institutions that secured one=s life and property and mitigated problems of cooperation and conflicts were initially provided by large kinship groups. Subsequently, such institutions that rely on this family structure were complemented or replaced by those provided by self-interested rulers. Corporation-based institutions can substitute for those provided by both kinship groups and self-interested rulers. When they substitute kinship-based institutions, corporations are complementary to a different family structure, namely, the nuclear family structure. For an individual, corporations reduce the