Trade and information shocks, and market development: Evidence from early modern Europe

Abstract

In the sixteenth century some northwest European cities underwent institutional change. These cities removed privileges that members of certain merchant guilds enjoyed, and began to develop contractual infrastructure necessary for the functioning of modern impersonal markets. I find that these modernizing cities became distinct in their consumption of ``bourgeois" trade-related content only in the late sixteenth century and had peculiar geographic characteristics. They were at the Atlantic coast, and had an early lead in adoption of printing, influenced by their closeness to Mainz where the movable type printing press was invented. Such geographical features exposed these cities to the simultaneous trade and information shocks of Atlantic trade and the Gutenberg printing press, in the late fifteenth century. These shocks made market opportunities outside of guilds lucrative and provided precise private information about these opportunities triggering market development and the endogenous evolution of supporting economic institutions. By examining the factors that triggered a structural change in northwestern Europe - at a disruptive period in history - the paper contributes to the understanding of how modern markets evolve.

Keywords: Europe, Printing, Information Technology, Atlantic Trade, Guilds, Markets

JEL Classification: N13, N23, N43, N73, N93, Z13