Working Paper: CEPR ID: DP9439
Authors: Klaus Desmet; Stephen Parente
Abstract: This paper analyzes the decision of a group of specialized workers to form a guild and block the adoption of a new technology that does not require their specialized input. The theory predicts an inverted-U relation between guilds and market size: for small markets, firm profits are insufficient to cover the fixed cost of adopting the new technology, and hence, specialized workers have no reason to form guilds; for intermediate sized markets, firm profits are large enough to cover the higher fixed costs, but not large enough to defeat workers? resistance, and so workers form guilds and block adoption; and for large markets, these profits are sufficiently large to overcome worker resistance and so guilds disband and the more productive technology diffuses throughout the economy. We show that this inverted-U relation between guilds and market size predicted by our theory exists in a dataset of Italian guilds from the 14th to the 19th century.
Keywords: competition; guilds; market size; resistance to technology; special interest groups; technology adoption
JEL Codes: N13; O14; O31; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| small market size (D40) | no guilds (Y70) |
| intermediate market size (D40) | guild formation (J51) |
| large market size (D40) | guild disbandment and technology adoption (O14) |
| market size (L25) | guild presence (J51) |