The Secret Of Venetian Success: The Role Of The State In Financial Markets
AbstractThe commercial success of Venice hinged on her merchants¿ ability to do business with borrowed money. However, to raise other people¿s capital, merchants needed to commit not to embezzle the capital received. Despite this commitment problem, the evidence indicates an active financial market through which the Venetians, by and large, mobilized their savings to investments. What were the institutional foundations of this market? This paper claims that neither reputation-based institutions that did not rely on the state nor a coercive legal system provided such foundations. Instead, the state generated the rents and information required to induce merchants to refrain from acting opportunistically.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-28.
Length: 33 pages
Date of creation: Sep 2005
Date of revision:
Publication status: Published by Ivie
Institutions for Contract Enforcement; State Formation; Financial Markets; Late Medieval Venice;
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- Hoffman, Philip T. & Postel-Vinay, Gilles & Rosenthal, Jean-Laurent, 2001. "Priceless Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226348018.
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