Working Paper: CEPR ID: DP7374
Authors: Roberta Dess; Salvatore Piccolo
Abstract: We develop a theory of the emergence of merchant guilds as an efficient mechanism to foster cooperation between merchants and rulers, building on the complementarity between merchant guilds' ability to enforce monopoly over trade and their social capital. Unlike existing models, we focus on local merchant guilds, rather than alien guilds, accounting for the main observed features of their behavior, internal organization and relationship with rulers. Our model delivers novel predictions about the emergence, variation, functioning, and eventual decline of this highly successful historical form of network. Our theory reconciles previous explanations and the large body of historical evidence on medieval merchant guilds. In doing so, we also shed novel light on the role of the guilds' social capital, and its importance for taxation, welfare, and the development of towns and their government in medieval Europe.
Keywords: merchant guild; social capital; collusion; political economy; trade; taxation
JEL Codes: L20; L43; N7; N8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social capital (Z13) | cooperation among guild members (P13) |
| cooperation among guild members (P13) | collusion (D74) |
| collusion (D74) | enforcement of exclusive trading rights (F13) |
| social capital (Z13) | enforcement of exclusive trading rights (F13) |
| social capital (Z13) | recognition by rulers (H11) |
| recognition by rulers (H11) | privileges for guilds (N93) |
| social capital (Z13) | bargaining power for guilds (J52) |
| bargaining power for guilds (J52) | share of collusive profits (D26) |
| decline of guilds (N93) | costs of relying on agents for tax collection decrease (H26) |
| decline of guilds (N93) | characteristics of polity (D72) |