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

52 Pages Posted: 26 Aug 2009

See all articles by Roberta Dessi

Roberta Dessi

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ)

Salvatore Piccolo

University of Bergamo, Compass Lexecon and CSEF

Date Written: July 2009

Abstract

Local merchant guilds were ubiquitous in medieval Europe, and their development was inextricably linked with the development of towns and the rise of the merchant class. We develop a theory of the emergence of local 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. Our model explains the main observed features of local merchant guilds' behavior, their rules and internal organization, including membership restrictions and exclusion, and their relationship with rulers. Moreover, it identifies the main channels through which the guilds' social capital influenced their ability to collude with rulers, and hence social welfare. As we show, the available historical evidence supports our theory, shedding new light on the role of the guilds' social capital. We then extend the model to analyze the key trade-offs faced by rulers in choosing whether to grant recognition to one or multiple guilds. This provides an additional rationale for the establishment of the alien merchant guilds first analyzed by Greif, Milgrom and Weingast (1994), helping us to understand the observed distribution of guilds and their characteristics.

Keywords: collusion, merchant guild, political economy, social capital, taxation., trade

JEL Classification: H2, L4, N4

Suggested Citation

Dessi, Roberta and Piccolo, Salvatore, Two is Company, N is a Crowd? Merchant Guilds and Social Capital (July 2009). CEPR Discussion Paper No. DP7374, Available at SSRN: https://ssrn.com/abstract=1462003

Roberta Dessi (Contact Author)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France

Salvatore Piccolo

University of Bergamo, Compass Lexecon and CSEF ( email )

via de caniana 2
24127
Bergamo, BG 24127
Italy

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