Working Paper: CEPR ID: DP17456
Authors: Marianna Belloc; Francesco Drago; Mattia Fochesato; Roberto Galbiati
Abstract: We study mechanisms and consequences of an institutional capture using novel hand-collected data from the Florentine Republic. In the 14th-15th centuries, political offices were assigned in Florence by a system combining elections and lottery, which ensured for several decadesa substantial alternation of power. During the 1420s, after a fiscal crisis, the Medici family became the first lender of the Republic, obtained a leading position in the city, and captured the office allocation mechanism, while leaving the political institutions formally unchanged. Employing individual level information on wealth, political participation, and party affiliation, we first document how the Medici manipulated office assignment and we show that, under their regime, participation into politics became a source of individual wealth accumulation. By usingcomplementary data sources on voluntary loans to the Republic, we then provide several pieces of evidence that explain our findings in terms of rent extraction. Finally, we illustrate that individuals at the top of the wealth distribution gained from the institutional capture at theexpenses of other citizens.
Keywords: Wealth; Institutional Capture; Selection of Politicians; Political Institutions; Patronage; Rent Extraction
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal crisis in the 1420s (N13) | Medici's capture of office allocation mechanism (D72) |
| Medici's capture of office allocation mechanism (D72) | Increase in political participation among wealthier citizens (D72) |
| Medici's rise to power (B11) | Positive correlation between individual wealth and terms in office (D31) |
| Medici's manipulation of office assignment system (D73) | Favoring of allies and penalizing of opponents (D74) |
| Medici's manipulation of office assignment system (D73) | Alteration of wealth distribution in favor of top 10% of households (D31) |