Political Fragmentation and Investment Decisions: The Milling Industry in Feudal France (1150-1250)

Abstract:     
Evidence from the medieval milling industry in Northern France (1150-1250) is used to explore effects of political structure on rulers' monopolistic gains and investment decisions. Using Salop's (1979) spatial model as a theoretical framework, we show that investment in watermill construction increased in this period even though political fragmentation, due its effect on rulers' capacity to limit competition, significantly reduced rulers' income. Furthermore, our calculations show that more than one third of the mills actually constructed, cannot be economically justified unless rulers' profit maximization over joint production is considered, and revenues from additional labor allocated to wheat production is included.

Number of Pages in PDF File: 38

Keywords: Technology adoption, competition, political fragmentation, monopolistic gains, watermills, milling, Ponthieu, middle ages

JEL Classification: N43, N63, D20, D60, L20, O31

working papers series