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Two is Company, N is a Crowd? Merchant Guilds and Social Capital

Author

Listed:
  • Roberta Dessì

    (Toulouse School of Economics (GREMAQ and IDEI) and CEPR)

  • Salvatore Piccolo

    () (Toulouse School of Economics, University of Naples Federico II and CSEF)

Abstract

We develop a theory of the emergence of merchant guilds as an efficient mechanism to implement collusion among merchants and rulers, building on the natural complementarity between merchants’ market trading and mutual monitoring. Unlike the seminal paper in the existing literature, we focus primarily on the far more numerous local merchant guilds, rather than alien guilds, accounting for the main observed features of their behavior, their internal organization, and their relationship with rulers. Our model delivers novel predictions about guild size, membership restrictions, and their welfare implications. It also identifies the main channels through which the guilds’ social capital influenced their ability to collude effectively with rulers. As we show, the available historical evidence offers ample support for our theory, shedding new light on the role of the guilds’ social capital. We then analyze the key trade-offs faced by rulers in choosing whether to grant recognition to one or multiple guilds. This helps us to understand the observed distribution of guilds, and provides a rationale for the establishment of both local and alien merchant guilds.

Suggested Citation

  • Roberta Dessì & Salvatore Piccolo, 2008. "Two is Company, N is a Crowd? Merchant Guilds and Social Capital," CSEF Working Papers 202, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 12 Jul 2009.
  • Handle: RePEc:sef:csefwp:202
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    References listed on IDEAS

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    Cited by:

    1. Charles Angelucci & Simone Meraglia, 2015. "Trade, Law and Order, and Political Liberties: Theory and Application to English Medieval Boroughs," Discussion Papers 1509, Exeter University, Department of Economics.
    2. Angelucci, Charles & Meraglia, Simone, 2013. "Trade, Self-Governance,and the Provision of Law and Order, with an Application To Medieval English Chartered Towns," TSE Working Papers 13-443, Toulouse School of Economics (TSE).

    More about this item

    Keywords

    merchant guild; social capital; collusion; political economy; trade; taxation;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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